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Business Running costs, Profits, Payment Terms and Cashflow One of the areas, where many new business owners fall flat on their faces, is in not knowing the true cost of running their business. So what does it cost to run a business? You need to add the following costs (and any others you can think of) to work out your running costs. 1. Salaries – Yours – you are the most important person to the business and need to be paid accordingly, though in the beginning you should take as little as you can to allow the business to build up. 2. Wages – the staff – Start with unskilled or junior people who can start low and slowly work their way up. 3. Telephones / Internet (calculate the total amount, including line rental). 4. Depreciation of purchased equipment (your accountant can help you here). 5. Rent (if working from home, work out how the percentage of the house you use for business, and that is the percentage of your bond repayments that should be rent – even if you don’t actually pay the rent). 6. Vehicle Running costs (work on an AA rate per km for your vehicle). 7. Business and Vehicle insurance costs. 8. Water and Electricity 9. Advertising costs 10. Stationery and paper (for printing invoices etc) 11. Software costs – things like anti-viruses and many programs these days have yearly subscriptions. 12. Security Costs (if working from home, use a percentage of the house you use to work this out). Once you add all these costs up, you will have a good idea of what it costs to run your business, and you can see why it’s so important to make enough profit on the items you sell.
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