Although different businesses have different costs associatedwith them, the main operating expenses of most businessesinclude:
Rent. Under many lease agreements, you’ll be expected toprovide the first month’s rent plus a security deposit. Manyleasors also require the last month’s rent.
Phone and utilities.
Equipment. Equipment costs vary from one business toanother. At a minimum, most businesses need office equipment,signage, and security systems. To determine your costs, list allthe equipment you must have to efficiently operate yourbusiness.
Fixtures. This broad category includes partitions,paneling, signage, storage cabinets, lighting, checkout counters,and all shelves, table stands, wall systems, showcases, and relatedhardware for product display. The cost of fixtures depends on yourbusiness location, the size and condition of your facility, thetype of business you’re in, what kind of image you want it toproject, and whether you’re purchasing new or used fixtures.
Inventory. Like equipment, inventory requirements varyfrom business to business. Some businesses, such as retail stores,are inventory-intensive, whereas others, such as personal shoppingservices, don’t require any inventory at all except officesupplies.
Leasehold improvements. These nonremovable installations,either original or the result of remodeling, include carpeting andother floorings, insulation, electrical wiring and plumbing,bathrooms, lighting, wall partitions, windows, ceiling tiles,sprinkler systems, security systems, some elements of interiordesign, and sometimes heating and/or air-conditioning systems.Because the cost of improvements can vary tremendously, get severalestimates from reputable contractors.
Licenses and tax deposits. Most cities and countiesrequire business operators to obtain various licenses or permits toshow compliance with local regulations. Licensing costs vary frombusiness to business, depending on the requirements of yourparticular location.
Marketing budgets. Most companies determine their firstyear’s advertising budget as a percentage of projected gross sales,typically two to five percent.
Professional services. Generally, this refers to yourlawyer and accountant. Their fees will range according to theirexpertise, and the location and size of their practices.
Payroll.
Insurance.
A word of caution when estimating these costs: If there’s ever atime to be conservative, it’s now. Err on the high side when youproject expenses, and on the low side when you project revenue. Anddon’t forget to add a “rainy day” or contingency fund to cover thecosts of unforeseen expenses-somewhere around five percent of yourbudget is a typical amount to set aside. This financial cushionwill help you-and your investors-avoid panic in case you’re facedwith an expense you hadn’t budgeted for.
