Everywhere you look, it seems many companies – large and small – are going out of business. Their downfall often is not their business idea or concept, it is the fact that they didn’t properly account for the costs associated with running their business. Overhead costs are part of the daily running of your business, but if your revenue is up and down, then it can be hard to cover 2226those costs without accruing late fees or being forced to give up growth opportunities.
Take Toys ‘R Us as an example. The company recently filed for bankruptcy due to a staggering $5 billion in liabilities. Those liabilities start with loans meant to cover growth or overhead costs, but eventually, the amount of your overhead costs exceeds the assets that your business owns. The reality is that once that happens, your business is in danger of going under.
Your business probably can’t compare in size or scale to a retail giant like Toys ‘R Us. Still, even a small business can rack up considerable overhead expenses, including the costs associated with space, manufacturing, training, payroll, utilities, insurance, adn more. If you are struggling to cover these expenses, then growth opportunities or even the ability to add talents and skills through the hiring of personnel could be in jeopardy.
If you need to bring another manager onboard or purchase new equipment, you may wonder how you will manage financially. While those purchasing or hiring decisions could give you the ability to increase your revenue, the truth is that you are going to have upfront costs associated with this growth, in addition to the overhead costs for small businesses that you already have.
Take Toys ‘R Us as an example. The company recently filed for bankruptcy due to a staggering $5 billion in liabilities. Those liabilities start with loans meant to cover growth or overhead costs, but eventually, the amount of your overhead costs exceeds the assets that your business owns. The reality is that once that happens, your business is in danger of going under.
Your business probably can’t compare in size or scale to a retail giant like Toys ‘R Us. Still, even a small business can rack up considerable overhead expenses, including the costs associated with space, manufacturing, training, payroll, utilities, insurance, adn more. If you are struggling to cover these expenses, then growth opportunities or even the ability to add talents and skills through the hiring of personnel could be in jeopardy.
If you need to bring another manager onboard or purchase new equipment, you may wonder how you will manage financially. While those purchasing or hiring decisions could give you the ability to increase your revenue, the truth is that you are going to have upfront costs associated with this growth, in addition to the overhead costs for small businesses that you already have.
What Are Overhead Costs?
First, what do we mean by the term “overhead costs?”
These refer to ongoing costs you must regularly pay regardless of how much income your business is generating. Most of these costs are associated with the daily functioning of your business and directly impact your ability to generate additional income if they are not paid promptly.
Many of these costs are not directly related to creating the product or service that your company offers. Instead, these costs are associated with increasing sales, paying the taxes necessary for you to stay in business, paying your staff so they keep working to make your product, or are part of the administration of your business. These overhead costs are part of the reality of business administration.
