How much does it cost to run a business?
Businesses come in all sizes, but cost structures generally remain the same within certain industries. We asked Sageworks, a Raleigh, N.C.-based financial information company, to analyze the typical costs that various types of small businesses face. As a primer, overhead includes factors such as rent, payroll, utilities and services. The cost of sales includes raw materials (such as ice and cups for bars, for example), as well as any sales people’s salaries. Profit is what remains after overhead, cost of sales, taxes and depreciation are taken out. Clothing stores, for example, have a low overhead, but their cost of sales is extremely high because it includes the merchandise and the salaries of their sales employees. Child day care services, meanwhile, have a high overhead because they have no inventory -- only worker salaries and plenty of square footage for kids to play on. Below is a breakdown of the overhead, cost of sales, rent and payroll for nine different types of businesses, as a percentage of their revenue. (The revenue figures are averages for each industry based on 2007 Census figures.)
|Type of business||Overhead||Rent||Cost of sales||Payroll||Yearly revenue|
|Bars (Drinking places)||39.03%||8.68%||41.36%||19.51%||390,377|
|Offices of physicians||70.39%||5.73%||2.43%||46.19%||1,527,644|
|Building services (maintenance, supers)||40.54%||2.42%||42.51%||25.34%||613,611|
|Child day care services||72.97%||13.19%||3.79%||50.77%||395,221|
|Accounting, tax prep and payroll services||66.92%||6.58%||5.75%||42.35%||1,156,000|
SOURCES: Sageworks, a financial information company, and the 2007 Economic Census. GRAPHIC: Olga Khazan/The Washington Post. Published March 5, 2012.