1-2-3: Small Business Startup: Lists of Costs and Expenses

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.

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

Lists of various fixed expense levels

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

List of planned costs and expenses

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.

List of example costs and expenses

		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 -