Small Business Startup
Lists of Costs and Expenses

(Date posted: February 21, 2009)

This page shows sample lists of costs and expenses for a small business startup.

The main purpose of these sample lists is to illustrate the effect of fixed costs and expenses on the break-even point. A low break-even point allows you to make a profit even with low sales.

These lists are shown in the following topics:

Lists of various fixed expense levels
List of planned costs and expenses
List of example costs and expenses

These lists are discussed on the Planning Costs and Expenses page.


IMPORTANT

Before using this information to start a business be sure to read the following notice: Disclaimer

Lists of various fixed expense levels

The following lists show the adverse effects of using high fixed expenses when a small business venture first starts out.

As shown by these examples, you are better off with low fixed expenses until sales grow to a high level.

Low fixed expenses -- The table below shows the low fixed expenses that normally should be used when a business first starts out and has low sales.

-------------------- Low Fixed Expenses --------------------

Category

Pct of Sales

Low Sales

Medium Sales

High Sales

Sales

100%

5,000

15,000

50,000

Costs of products sold

  25%

1,250

  3,750

12,500

 



Gross profit

  75%

3,750

11,250

37,500

 



Fixed sales expenses  

   500

     500

     500

Variable sales expenses

  17%

   850

  2,550

  8,500

Startup costs & fixed operating expenses  

   250

     250

     250

Variable operating expenses

  22%

1,100

  3,300

11,000

   


Total expenses

 

2,700

  6,600

20,250

   


Net profit  

1,050

  4,650

17,250

Medium fixed expenses -- The table below for medium fixed expenses shows that it is better to stay with low fixed expenses until after the sales have grown to a high level.

---------------- Medium Fixed Expenses ----------------

Category

Pct of Sales

Low Sales

Medium Sales

High Sales

Sales

100%

5,000

15,000

50,000

Costs of products sold

  25%

1,250

  3,750

12,500

 



Gross profit

  75%

3,750

11,250

37,500

 



Fixed sales expenses  

1,500

  1,500

  1,500

Variable sales expenses

  15%

   750

  2,250

  7,500

Startup costs & fixed operating expenses  

   500

     500

     500

Variable operating expenses

  20%

1,000

  3,000

10,000

   


Total expenses

 

3,750

  7,250

19,500

   


Net profit  

-0-

  4,000

18,000

High fixed expenses -- This table below for high fixed expenses shows that they don't have an advantage over low fixed expenses and medium fixed expenses until after sales have grown to a high level.

------------------ High Fixed Expenses ------------------

Category

Pct of Sales

Low Sales

Medium Sales

High Sales

Sales

100%

5,000

15,000

50,000

Costs of products sold

  25%

1,250

  3,750

12,500

 



Gross profit

  75%

3,750

11,250

37,500

 



Fixed sales expenses  

3,500

  3,500

  3,500

Variable sales expenses

  11%

   550

  1,650

  5,500

Startup costs & fixed operating expenses  

1,300

  1,300

  1,300

Variable operating expenses

  15%

   750

  2,250

  7,500

   


Total expenses

 

6,100

  8,700

17,800

   


Net profit (loss)  

(2,350)

  2,550

19,700

Top of Page


List of planned costs and expenses

The following list shows the planned costs and expenses for a proposed part-time (weekends) house painting venture.

For this example, it was assumed that the business owner already had a pickup truck and painting equipment. Also it was assumed that the wife of the owner would take care of all the bookkeeping and preparation of tax forms. Thus expenses that otherwise might have been shown were not needed. Fixed expenses are based on 12 months of operation. Startup costs are amounts paid prior to starting business operations.

   

Amount or Pct of Sales

Description

First Try

Second Try

Cost of products sold    
  Paint

 25%

  25%
  Equipment rental  10%   10%
  Paint supplies    2%     2%
Variable sales expense    
  Finder's fee (Note 1)    5%     7%
  Sales commission  15%   17%
Fixed sales expense    
  Salesman expense 1,000   - 0 -
  Sales clerk    500    500
Variable operating expense    
  Business tax    2%     2%
  Pickup expense    1%     1%
Fixed operating expense    
  Home office expense      20      20
  Office supplies      45      45
  Storage rental      50   - 0 -
Startup costs    
  Business license & insurance    150    150
  Initial office supplies      20      20
  New office furniture    215   - 0 -
  Used office furniture   - 0 -      15
   

Cost of products sold

  37%

  37%

Variable sales expense   20%   24%
Variable operating expenses   3%   3%
 

Total variable costs and expenses [TVCE]   60%   64%
Net variable contribution to profit   40%   36%
 

Fixed sales expenses 1,500    500
Fixed operating expenses    115      65
Startup costs    385    185
   

Total fixed costs and expenses [TFCE] 2,000    750
Total variable costs and expenses at break-even point 3,000 1,333
 

Total fixed and variable costs and expenses at break-even point 5,000 2,083
Sales at break-even point 5,000 2,083
 

Net profit at break-even point   - 0 -   - 0 -
 

The column marked "First Try" was the business owner's initial attempt at planning his costs and expenses. After showing the list to his wife, they were able to reduce some costs and expenses.

The column marked "Second Try" shows the revised plan for costs and expenses. Note how a few simple changes had a profound effect on the expected operating results.

Note 1: The business owner pays a finder's fee to any customer or other person who gives him the name and address of a homeowner who buys a house-painting job.

Top of Page


List of example costs and expenses

The following list shows the planned costs and expenses for my proposed small business startup.

   

Amount or Pct of Sales

Description

First Try

Second Try

Cost of products sold    
  Web delivery expense (estimated)

      1%

     1%
Variable sales expense    
  Sales commission to affiliates (estimated)    10%    - 0 -
  Search engine advertising    20%   20%
Fixed sales expense    
  Not applicable    - 0 -   - 0 -
Variable operating expense    
  Business tax      3%     3%
  Miscellaneous expense      6%     1%
Fixed operating expense    
  Home office expense        25       25
  Office and computer supplies        25       25
  Maintenance      150       25
  Refunds      100     100
  Web hosting service      250     125
Startup costs    
  Business license & insurance      130    130
  Initial advertising      100     100
  Initial office supplies        20      20
   

Cost of products sold

     1%

    1%

Variable sales expense    30%   20%
Variable operating expenses      9%     4%
 

Total variable costs and expenses [TVCE]    40%   25%
Net variable contribution to profit    60%   75%
 

Fixed sales expenses    - 0 -   - 0 -
Fixed operating expenses    550    300
Startup costs    250    250
   

Total fixed costs and expenses [TFCE]    800   550
Total variable costs and expenses at break-even point    533   183 
 

Total fixed and variable costs and expenses at break-even point 1,333  733
Sales at break-even point 1,333  733
 

Net profit at break-even point   - 0 -   - 0 -
 

Top of Page


Return from Lists of Expenses to Planning Costs and Expenses page

Return from Lists of Expenses to Small Business Startup main page

Return from Lists of Expenses to Home page