In a previous post, we addressed the less apparent and primarily intangible expenses that entrepreneurs can encounter when starting a new business. In this post, our focus shifts to the often-overlooked operational costs that play a vital role in maintaining a business but are frequently omitted when preparing cash flow projections.
While the specific expenses may vary depending on your industry and unique circumstances, the following list will help you consider some of the more common operational expense categories. It’s important to acknowledge that not all the expenses mentioned will be relevant to every business. To facilitate a structured approach to financial planning, we have classified these operational costs into thirteen distinct categories. Moreover, some expense items include potential expenditure ranges for a more precise budgeting process.
Insurance (annual)
Here are some common insurance-related expenses businesses incur on an ongoing annual or monthly basis:
General liability insurance – Covers property damage, bodily injury, and personal injury claims. Annual costs depend on business size, industry risk, and policy limits. It can range from $500 to $5,000+ per year.
Professional liability insurance – For professionals like consultants, lawyers, accountants, and architects. It can be $1,000 to $5,000+ per year.
Errors and omissions insurance – Protects against claims of inadequate work or negligent actions. $1,000 to $10,000+ per year in general.
Product liability insurance – For businesses producing or selling products. Protects against product defects/harm. Usually, $1,000 to $10,000 per year.
Commercial property insurance – Covers damage to business properties from events like fire, storms, and theft. Depends on property value but can range from $2,000 to $20,000 annually.
Commercial auto insurance – For company vehicles. $1,000 to $5,000 annually, depending on the number/type of vehicles.
Business interruption insurance – Covers loss of income due to disaster or unexpected closure. Based on business revenue.
Cyber liability insurance – Protection against data breaches, hacking, and malware. $500 to $5,000+ per year, depending on coverage.
Workers’ compensation – Required for employees. Rates vary by risk and state. The average is $1,500 to $3,000 per year per employee.
Unemployment insurance – Federal unemployment insurance is 6% of payroll for the first $7,000 in wages. State unemployment insurance varies by state and industry but ranges from 0 to 20.93% of payroll for the first $7,000 to $56,700 in wages, depending on state and industry.
Health insurance – Providing employee health benefits. $300 to $800+ per employee per month.
Here are some common ongoing marketing and advertising expenses businesses can expect on a monthly or annual basis:
Social media marketing – Paid ads on platforms like Facebook, Instagram, Twitter, and LinkedIn. Budget $300 to $1,000+ per month per platform.
Digital marketing – Search engine optimization, pay-per-click advertising on Google, Bing, and social media advertising to drive awareness and traffic. Bid prices vary by keyword, allow $1,000 to $5,000 per month.
Content marketing – Creating blogs, videos, and guides. Factor in writer and production fees if outsourcing. $5,000+ annually.
Email marketing – Subscription costs for email service providers such as MailChimp, Constant Contact, MailPoet, or ConvertKit. $0 to $100+ per month.
Direct mail – Design, printing, and postage costs for mail campaigns. $5,000 to $10,000+ annually.
TV & radio ads – Producing and airing video or audio ads. Extremely variable, but often in the tens of thousands.
Print advertising – Space in newspapers, magazines, and directories. Ranges from $100 to $10,000+ per ad monthly.
Event sponsorships – Having booths at local business expos, industry events, and networking functions. Budget $500 to $5,000 for participation fees and promotion.
Swag & promotional items – Branded t-shirts, pens, cups, etc. It can range from $1,000 to $5,000 per year.
Loyalty programs – Discounts or perks for repeat customers. Software and incentive costs.
Brand ambassadors – Hiring brand reps to promote your business and posts. $10 to $10,000 per post based on the number of followers.
Public Relations – Hiring a PR firm or consultants to build media relations and get press mentions for the business. Allow $3,000 to $10,000 annually.
Annual rents can vary widely, but below is a general ballpark based on an Offices.net report:
Retail rents average $18 per square foot, depending on the market.
Office rents average $38 to $50 per square foot.
Industrial warehouse rents average $8 per square foot.
Maintenance and Repairs:
When leasing commercial space, tenants can expect to pay additional maintenance and repair costs beyond just base rent, depending on the type of lease:
Gross lease – The tenant pays a fixed base rent amount, and the landlord covers property taxes, insurance, and maintenance. The tenant has no additional costs.
Modified gross lease – Tenant pays base rent and is responsible for some maintenance costs like interior repairs or common area upkeep.
Triple Net lease (NNN) – Tenant pays base rent plus “triple net” expenses – property taxes, insurance, and maintenance.
Common maintenance and repair costs tenants pay for include:
HVAC maintenance and repairs – $200 to $500 per HVAC unit serviced annually.
Electrical/plumbing repairs – $100 to $300 per hour for electrician/plumber services as needed.
Interior repairs – Drywall, flooring, fixtures. Varies greatly, budget $3 to $8 per square foot.
Parking lot repairs – Resurfacing, restriping, and seal coating. Budget $300 to $1,000 per 10,000 sq ft every few years.
Exterior Pressure washing – $300 to $1,000 annually for exterior building cleaning.
Janitorial services – $200 to $1,000+ monthly for office cleaning services if not self-performed.
Snow removal – $125+ per occurrence for plowing services in cold climates.
Landscaping – Lawncare, tree trimming, etc. Typically, $200 to $800+ monthly, depending on property size.
Utilities (monthly)
Here are some common ongoing utility expenses businesses can expect on a monthly or annual basis:
Electricity – To power lighting, equipment, and machinery. The average small business spends $200 to $2,000+ per month, depending on usage.
Gas – For heating, stoves, and machinery. Average $50 to $500 per month based on equipment needs.
Water – For bathrooms, kitchens, and cleaning. Around $50 to $200 per month depending on building size.
Sewer – For wastewater drainage. Often billed together with water for $100 to $300 combined.
Waste Removal – Garbage collection and dumpster rental. $50 to $300+ monthly, depending on waste volume.
Internet – Fast, reliable internet is essential for most businesses. $50 to $300 per month for business plans.
Telephone service – Landline and/or VoIP business phone packages. $50 to $150 per month.
Cell phones – For owners and employees. Typically, $30 to $80 per line per month.
Cable/Satellite TV – For lobbies, waiting rooms, and break areas. $50 to $200+ monthly.
Security system monitoring – Alarm systems, cameras, etc. Typically, $50 to $200 monthly.
Pest control – Preventative extermination services. It can be $50 to $200 monthly.
Employee Salaries
According to Reader’s Digest, here are some of the most common jobs in America and their average annual salaries:
Retail salespersons: $23,800
Cashiers: $29,600
Food preparation and serving workers: $25,300
Office clerks: $29,500
Registered nurses: $73,200
Customer service representatives: $33,500
Waiters and waitresses: $25,200
Laborers and freight, stock, and material movers: $29,700
Administrative assistants: $38,900
Janitors: $28,800
General and operations managers: $91,500
Stock clerks: $27,000
Heavy and tractor-trailer truck drivers: $47,900
Bookkeeping, accounting, and auditing clerks: $35,500
First-line supervisors: $41,800
Please note that these are average salaries. Actual salaries can vary based on factors such as location, level of experience, and the specific company.
Inventory (restocking and maintenance)
Varies widely by business type and size.
Taxes & Accounting
Here are some common ongoing accounting and tax expenses businesses can expect monthly or annually:
Bookkeeping – If outsourcing to an accountant, typical monthly fees range from $200 to $1,000 depending on transaction volume.
Payroll processing – Payroll provider services like ADP, Gusto, and OnPay. Around $40 to $100 basic monthly fee plus $5 to $10 per employee.
Federal payroll taxes – Employer portion of FICA and Medicare is 7.65% of payroll. For the self-employed, it is 15.3%.
Sales tax filing – If collecting sales tax, monthly or quarterly filings may have a fee per filing.
1099/1096 filing – Annual filing of 1099 forms for contractors. Expect a fee per 1099, around $2 to $5 per form.
W-2 filing – Annual filing of W-2 forms for employees. The fee per W-2 is around $2 to $10 each.
Business license renewals – Local business license annual renewals. Fees are based on revenue, up to a few hundred dollars.
Annual state registration – Annual corporate registration with the Secretary of State. From $50 to $800 depending on the state.
Income tax preparation – Annual income tax return preparation by a CPA or tax software. It can range from $300 to $3,000+ depending on its complexity.
Auditing fees – If required, annual audits by a CPA firm. Typically, $3,000 to $15,000 depending on size.
Website Maintenance and Digital Services
Here are some common ongoing website and digital presence costs businesses can expect monthly or yearly:
Domain registration – To renew a website domain name, around $10 to $20 per year.
Website hosting – The ongoing cost for a hosting provider to host and manage the site is typically $2 to $200 per month.
SSL certificate – For HTTPS secure site access, usually $10 to $200 per year.
Website maintenance – Web developer fees to maintain, update, and backup your website. Plan to pay about $100 to $300 monthly.
SEO optimization – Ongoing search engine optimization work, around $500 to $2,000 monthly.
Email service – Business email accounts via G Suite, Office 365, Zoho, etc. Typically, $5 to $20 per user per month.
CRM software – Customer relationship management for tracking sales leads and customers. $12 to $300 per user per month.
Live chat software – For real-time support and engagement. Starting at $0 (Tawk.to) to $59 per month.
Forms & surveys – Tools like Typeform or SurveyMonkey to collect data. $20+ per month.
Stock photos – Ongoing need for new stock imagery. Plan $25 to $250+ per high-res photo. (Among the free sites are Pixabay, Pixels, and Unsplash).
Data storage – Cloud storage for backups and documents. According to Tomsguide, expect to pay between $5 and $80+ monthly.
Cybersecurity – Antivirus, firewall, data protection software. According to Statista, small businesses spend 12% of their IT budget on cybersecurity. It can be between $20 to $100+ per device monthly.
IT support – Managed IT services to maintain networks and hardware. Plan to budget around $100 to $350 per month.
Shrinkage (theft, loss, damage)
Shrinkage refers to inventory losses due to factors like theft, damage, spoilage, or accounting errors. As a retail business, here are some guidelines on budgeting for shrinkage:
The retail industry average shrinkage is around 1 to 2% of total retail revenue annually. Some sectors see over 3%.
The most significant causes of shrinkage are often employee theft, shoplifting, administrative errors, and spoiled/expired goods.
Budget higher shrinkage for businesses selling small, high-theft items like jewelry, electronics, tools, and watches. Around 2 to 4% of revenues.
Perishable goods like food and produce also carry higher shrinkage due to spoilage. Budget 3 to 6%+ of revenue.
Higher-value durable goods like appliances tend to have lower shrinkage in the 0.5-1.5% range.
New businesses should budget towards the higher end for shrinkage, around 2 to 4%, as policies and loss prevention may not be fully refined.
Budget for both the cost of lost inventory and any security expenses:
Cost of lost goods
Security systems (cameras, tags, locks)
Security staffing
Loss prevention training
Auditing and analyses
Dedicating 2 to 4% of total retail revenue to shrinkage is a reasonable estimate for most operations. Budgeting higher in the first year and lower as your systems improve is recommended.
Merchant Fees (credit card processing)
Here are some common merchant fees businesses can expect to pay on an ongoing basis for accepting payments:
Credit Card Processing Fees:
Transaction fees – Typically 2.9% + $0.30 per transaction for cards like Visa, Mastercard, AmEx, and Discover.
Authorization fees – $0.10 to $0.35 per authorization request.
Statement fees – Around $5 to $10 per monthly statement.
PCI compliance fees – $15 to $150 annually for secure data compliance.
Chargeback fees – $15 to $25 per disputed transaction that is charged back.
Third-Party Processor Fees:
PayPal – The standard is 2.29% + $0.09 per transaction.
Square – 2.6% + $0.10 for in-person payments, higher for online payments.
Point of Sale System Fees:
Monthly software fees – $39 to $199 per month for POS software.
Payment gateway fees – Often an additional percentage per transaction.
Other Costs:
Pin debit transaction fees – $0.20 to $0.50 per transaction.
Equipment repair/replacement – Budget for repairs or replacement every 3 to 5 years.
Supplies – Receipt paper, printer ink.
In short, beyond the 2 to 3% transaction fees, businesses can expect to spend $100 to $500+ in monthly merchant services costs.
Equipment Upgrades & Repairs
Varies based on equipment type and age.
Loan Principle & Interest (if applicable)
Varies based on loan terms.
Legal Fees (ongoing legal services)
Legal consultations – $100 to $500 per hour
Ongoing legal support – varies based on needs.
Please note that these are rough estimates, and actual costs can vary significantly based on your specific circumstances, location, and business size. Creating a detailed budget and financial plan is crucial to accurately estimate your startup and ongoing expenses.
Each of these categories plays a significant role in your business’s operational and financial success. By recognizing and accounting for these often-hidden expenses in your cash flow projections, you’ll be better equipped to plan, budget, and navigate the ongoing operational costs to ensure a strong and sustainable business future.
Have you accounted for all the often-hidden ongoing expenses in your cash flow projections?
