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Permanent link for Estimating Operating Expenses on May 26, 2023

Operating expenses are the second of three major sources of financial expenses in your business. Operating expenses are the ongoing costs of running your business, regardless of whether any product is sold.

To estimate your operating expenses, start by making a list of the items and expenses you will need to run your business. Then, research the cost of each item and expense to arrive at an accurate estimate. Be sure to include any recurring expenses, such as monthly rent or utility bills.

Here are some common types and categories of operating expenses that you should consider when estimating your startup costs:

  1. Rent: This includes the cost of leasing or renting office space or a storefront.

  2. Utilities: This includes the cost of electricity, water, gas, and other utilities needed to operate your business.

  3. Salaries and wages: This includes the cost of paying your employees, including payroll taxes and benefits.

  4. Marketing and advertising: This includes the cost of promoting your business, including social media ads, print ads, sponsored content, and travel to trade shows or key customers.

  5. Supplies and inventory: This includes the cost of purchasing materials and supplies needed to provide your products or services.

  6. Insurance: This includes the cost of insuring your business against liability, property damage, and other risks.

  7. Professional fees: This includes the cost of legal and accounting services.

When estimating your operating expenses, be sure to include all related costs, such as taxes, shipping fees, and other related expenses. It's also important to consider any seasonal fluctuations in your expenses, such as higher heating bills in the winter.

Once you have estimated your operating expenses, you can use this information to determine your cash flow needs and create a budget for your business. You should aim to have enough capital to cover at least six months of operating expenses, and ideally a year or more.

Categories: entrepreneurship funding management
Posted by Thomas Hopper on Permanent link for Estimating Operating Expenses on May 26, 2023.

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Page last modified May 26, 2023