Estimating running costs
The ongoing costs of running your business will include:
Materials costs
You can work these out by estimating the amount of raw materials or other inputs you need to produce your goods or service. It's important to allow for wastage. Don't forget to add in costs such as packaging, storage and consumables.
You can work these out by estimating the amount of raw materials or other inputs you need to produce your goods or service. It's important to allow for wastage. Don't forget to add in costs such as packaging, storage and consumables.
Labour costs
This is the cost of employing workers and should include costs of national insurance and employer's insurance.
This is the cost of employing workers and should include costs of national insurance and employer's insurance.
Overheads
These are the costs which are not directly related to making the goods and services such as:
These are the costs which are not directly related to making the goods and services such as:
- Rates
- Electricity
- Insurance
- Telephone
- Postage
- Stationery
- Transport Costs
- Bank Charges and Interest
- Repairs and maintenance
- Marketing and advertising
Generally speaking material and labour costs will vary according to your output. For this reason they are known as variable costs. For example, if you are running boarding kennels the amount of dog food you need and the number of helpers required will relate to the number of dogs you are boarding.
On the other hand, taking the same example, you will have to pay your overheads such as rates, whether or not you have any dogs boarding with you. For this reason these types of costs are known as fixed costs.
It is important to keep an eye on your fixed costs since if they are very high they can drain your finances.
