Category: 

What Are the Different Types of Business Operating Costs?

Article Details
  • Written By: Lori Kilchermann
  • Edited By: Lauren Fritsky
  • Last Modified Date: 05 September 2016
  • Copyright Protected:
    2003-2016
    Conjecture Corporation
  • Print this Article
Free Widgets for your Site/Blog
The U.S. Coast Guard led the evacuation of more than 500,000 people from Lower Manhattan on 11 September 2001.  more...

September 27 ,  1940 :  The World War II Axis powers formed with the signing of the Tripartite Pact.  more...

There are many different types of business operating costs that must be factored into any business plan. Budgeting for advertising, labor and material supplies is required for a smooth-operating company. Building maintenance supplies, employee uniforms and delivery vehicle maintenance are other business operating costs that are often overlooked when figuring a budget. Many types of business are plagued by often-hidden waste costs when attempting to calculate business operating costs. Other costs not always planned on are sick time, special menu costs in restaurants as well as the cost of maintaining a fresh assortment of vegetables and other refrigerated stock.

Often, business operating costs are incidental costs that can be easily overlooked and end up as unexpected losses when figuring total profits. The cost of utilities, insurance and printing of advertising pamphlets, menus and signage are often overlooked factors of business operating costs that catch many new business owners by surprise. Other areas of unexpected costs are computers and software, the purchase of music for creating a certain atmosphere and legal fees for the creation of the business and tax purposes. In many cases, the purchase of desks, chairs and other office equipment can be equal to or greater than a month's payroll.

Ad

One of the greatest of all business operating costs is the rental of the structure the business is operating from. In a manufacturing business, the occupancy of a unit within an industrial complex can cost as much as a typical family house payment every month. The rental or lease of fork lift trucks and railroad cars as well as contracting with a security agency to provide patrols of the business property area can be an enormous load on a company's finances. The installation of a building-wide communication system, or an upgrade of an existing system, can also be a very expensive must-have for a business.

Insurance is another of the business operating costs that is occasionally overlooked when developing a budget or initial operating cost breakdown. Since many manufacturing companies rent or lease the equipment used to produce components, such as presses, dies and robotic welders, all of these costs must be able to be recouped at some point. The costs of lathes, hand tools and quality control testing apparatus are also operational expenses for many businesses. In order to bring a fresh appearance to an older and established company, a total remodeling or upgrading of the company image, such as a logo redesign, is another of the many business operating costs.

Ad

You might also Like

Recommended

Discuss this Article

Oceana
Post 4

@seag47 – Your cousin might be making a mistake. Yes, advertising is super expensive, but if you expect to get your company's name out there, you have to do it.

Flyers and signs are better than nothing, but something that would reach a lot of people, like a radio ad, would be ideal. He could buy an ad that will air a specified number of times, and people will hear about his place. I am almost certain that would bring more people into his store.

If he doesn't have the cash right now, perhaps he should put it on his credit card. He could pay it off a week at a time, and he would have broadcast information about his business to potential customers, who could help him pay it off.

seag47
Post 3

I realize that an advertising budget is important to a new business. However, if you are struggling to make ends meet, can you really afford to set aside money for it?

My cousin has just opened a clothing store. He ran one ad with a coupon in it in the local paper, and he didn't get more than a couple of customers from it.

The ad was very expensive, and right now, he can't afford to focus on something that isn't guaranteed to bring in customers. He has decided to make big signs himself and place them in the store windows, as well as flyers, which he will distribute around town.

OeKc05
Post 2

Rent for a commercial building can be insanely high. My friend and her husband opened up a party supply store in the middle of town this year, and their rent is double what I pay for my rent each month.

They were terrified when business started out slow. They knew they wouldn't be able to make the rent for long if things continued as they were. However, in the fall, business picked up drastically, and they are making a good profit now.

I know that location is everything, but I would be scared to pay such high operating costs. It worked out for them, because the area had no other store like theirs. However, I have seen many businesses close after only a few months because of the high building rent.

StarJo
Post 1

I don't know how restaurant owners do all they do and still keep their sanity. My friend runs one, and he told me about all the different costs of operation. If he overlooks one area, it can cost him a day's income.

He generally runs about the place all day, trying to see to everything that needs doing. He said the most stressful part is keeping up with the fresh produce and how often it needs to be replaced.

They buy in bulk, so when a bunch of greens starts to go bad, they are out a good bit of money. However, they have to calculate this into their overall costs. They know that maintaining fresh ingredients is essential to keeping customers happy, so they just have to chunk out the old ones and suffer the anticipated loss.

Post your comments

Post Anonymously

Login

username
password
forgot password?

Register

username
password
confirm
email