How to calculate small business operating cost

Written by najla a.y. slowe
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Operating costs are the monthly expenses incurred when operating a business. It is important that the business owner account for all of the operating costs so he will know how much revenue must be generated for the business to break even. Ideally, the revenue generated by the business will exceed the operating costs, creating a profit. When starting a small business, it is important that the owner also include any one-time operating costs, such as business registration and licensing fees, into the overall operating costs.

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    Calculating Operating Costs

  1. 1

    Make a list of all the operating costs for the business. This can be done in a simple Excel chart or with accounting software packages such as QuickBooks or Peachtree. Most businesses have monthly operating costs that include rent, utilities, salaries, loan payments, equipment, office supplies, maintenance, fixtures, inventory, licenses, taxes, marketing expenditures and professional services.

  2. 2

    Estimate how much each expense will cost the business every month. It is always better to overestimate an expense than to underestimate it; underestimates create debt. Some expenses, such as rent, are easy to calculate because they are fixed costs. For an expense that may fluctuate, such as an electric bill, the business owner can call the utility provider and ask for an estimate.

  3. 3

    Add the list of estimated operating costs to reach a monthly estimate for running the business. At the end of the month, the actual operating costs can be compared with the estimate to see how accurate the projections were.

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