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In another recent post, someone commented about having to charge so much per hour even though I'm a home based business.
Well, since it's that "tax" time of year again, I thought it would be good to share some of the cost/expenses of running a home based business that I have "budgeted" into my overhead and hourly rate.
A large chunk of my overhead is rent/mortgage and the related expenses. Even though I am home based, the business must pay its "fair share". And, since the business occupies nearly 50% of the house, the business must pick up nearly 50% of the mortgage, taxes and related expenses.
The business also pays for its fair share of utilities, electric, gas, water, sewer, trash, alarm monitoring, etc., and pays the full amount for other expenses that I would normally not have if I did not run the business out of the home. Such things as high speed internet, additional phone lines, etc. are all business expenses.
Then there's the cost of maintenance and upkeep of the property and yes, the business must contribute there too. Everything from lawn maintenance and snow removal to a new water heater or roof all are figured into the cost of running my business.
And, just like a retail business, cost of running and maintaining a home based business adds up. There are the usual monthly expenses like sales and advertising, insurance, and general upkeep of equipment. I must also budget for the eventual upgrades, repairs and/or replacement of the equipment and also account for the extra wear and tear on my vehicle(s) because I tend to travel more than I would with a retail location.
Let’s not forget the investment of training and continuing education in the form of travel to meets, seminars and trade shows, magazine and web site subscriptions, dues to trade associations, etc.
What I get paid is somewhat insignificant because I have my CPA determine my “salary”. However, the amount I have budgeted into my overhead is adequate to cover my personal living expenses. In addition to what I budget for my pay, the business needs to provide for my eventual retirement and there is an amount set aside in the budget for my eventual retirement too.
And let’s not forget the "perks" of running the business. Some expenses that were once personal now can be written off as business expenses. For example, as officers of the corporation, the business pays for life insurance for my wife and me - up to a certain amount. Don't take my advice though, I would strongly urge you to consult your CPA to see what you can or can not expense.
And finally, there’s the cost of professional fees. While somewhat insignificant compared to other expenses, my CPA makes sure what I pay in taxes is minimal while retaining as much profit as possible. And, my attorney makes sure the business is protected while allowing every possible resource to collect what I am owed.
The most important thing to remember when starting and running your business is it's your business and it must provide for your wants and needs. And, the best way to do this is to plan. I would strongly recommend starting with your personal budget and grow from there because, if you don’t know your personal needs, how can you build your business to provide for them?
Checkers
Well, since it's that "tax" time of year again, I thought it would be good to share some of the cost/expenses of running a home based business that I have "budgeted" into my overhead and hourly rate.
A large chunk of my overhead is rent/mortgage and the related expenses. Even though I am home based, the business must pay its "fair share". And, since the business occupies nearly 50% of the house, the business must pick up nearly 50% of the mortgage, taxes and related expenses.
The business also pays for its fair share of utilities, electric, gas, water, sewer, trash, alarm monitoring, etc., and pays the full amount for other expenses that I would normally not have if I did not run the business out of the home. Such things as high speed internet, additional phone lines, etc. are all business expenses.
Then there's the cost of maintenance and upkeep of the property and yes, the business must contribute there too. Everything from lawn maintenance and snow removal to a new water heater or roof all are figured into the cost of running my business.
And, just like a retail business, cost of running and maintaining a home based business adds up. There are the usual monthly expenses like sales and advertising, insurance, and general upkeep of equipment. I must also budget for the eventual upgrades, repairs and/or replacement of the equipment and also account for the extra wear and tear on my vehicle(s) because I tend to travel more than I would with a retail location.
Let’s not forget the investment of training and continuing education in the form of travel to meets, seminars and trade shows, magazine and web site subscriptions, dues to trade associations, etc.
What I get paid is somewhat insignificant because I have my CPA determine my “salary”. However, the amount I have budgeted into my overhead is adequate to cover my personal living expenses. In addition to what I budget for my pay, the business needs to provide for my eventual retirement and there is an amount set aside in the budget for my eventual retirement too.
And let’s not forget the "perks" of running the business. Some expenses that were once personal now can be written off as business expenses. For example, as officers of the corporation, the business pays for life insurance for my wife and me - up to a certain amount. Don't take my advice though, I would strongly urge you to consult your CPA to see what you can or can not expense.
And finally, there’s the cost of professional fees. While somewhat insignificant compared to other expenses, my CPA makes sure what I pay in taxes is minimal while retaining as much profit as possible. And, my attorney makes sure the business is protected while allowing every possible resource to collect what I am owed.
The most important thing to remember when starting and running your business is it's your business and it must provide for your wants and needs. And, the best way to do this is to plan. I would strongly recommend starting with your personal budget and grow from there because, if you don’t know your personal needs, how can you build your business to provide for them?
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