The costs of doing business

by Michele on February 9, 2011

The costs of doing business

The costs of doing business

Do you have a good handle on your costs of doing business?  How much revenue do you need just to keep the doors open?  How much in costs do you incur each time you sell something?

Lots of solopreneurs don’t have a solid grasp of their cost of business.  So often, solopreneurs just want to help others and do what they love.  They don’t want to know about or manage the business side of things.  In fact,  a lot of solopreneurs love their work so much they don’t even think of it as a business – they’d give their services away if they could.

The problem with this is that it doesn’t work.  Not paying attention to the costs of business means you are operating in the dark and can’t make sound decisions.  Many people start their solopreneur business thinking they just need to print a few business cards, put up a website and start doing their work.  Word of mouth and the fact that the world needs their brilliance will handle the rest, right?  Wrong.

You are as much as business owner and manager as you are a provider of  whatever product or service you provide.  You need to handle the business end of things in a manner that supports you and your work.   Part of this is always having a handle on the costs of doing business.  When I worked for big corporations, the budget was a huge ominous document that took months to prepare and was both revered and feared.  I’m not suggesting you do that, but you can start by making a list of the costs of doing business that you incur just to open your doors.  These costs are generally fixed, i.e. stable and predictable within the range of business volume you could expect in the near future.

Some examples of fixed costs could include:

  • web hosting
  • domain registration
  • phone and utility bills
  • rent
  • ongoing training you are investing in

It helps to know what costs of doing business you have each month so that you know how much you need to cover them.  It’s the first step to understanding and managing the profitability of your solopreneur business.

You also incur costs that only happen when you generate revenue.  These costs are variable and depend on how much you sell and may vary by product.

Have you ever tallied your costs of doing business?  Were you surprised, either in a good way or a bad way?

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