Welcome back! Today we are taking an in-depth look at Expenses. What is an expense, minimizing business expenses, and how they affect your profit (aka…the money in my pocket)? Let’s get started! 

Minimizing Business Expenses – Video

 

Definition of Expense: The cost required for something; the money spent on something.

• Layman terms: The stuff you spend money on to make your business grow.

Types of Expenses

• • Cost of Goods Sold (COGS): The expenses related to creating your product or service. This is anything you need to create your product. For me, that means:
    • Flowers, Tape, Zip Ties,
    • Inventory (moves to asset): Vases, Stands, Arches, Linens,
  • Overhead: All non-labor fixed expenses that are not directly related to creating your product (i.e. not COGS).
    • Utilities
    • Rent
    • Other Fixed Expenses: These expenses stay the same every month.
      • Software – Canva, Flodesk
    • Taxes: The money you pay to Uncle Sam
      • Sales Tax
      • Franchise Tax
      • Income Tax
      • Payroll Tax
    • Labor
      • Contractors/Hourly Workers: Varies based on how much work you are doing
      • Salaries: Fixed Expense paid to your employees weekly, bi-weekly, or monthly.

How do you know if you need an expense?

• Personalized for every business
  • Trial and Error. Is it wise to just try something out and hope it works? Sometimes, but not on a regular basis. Only use this method if you can not measure the pros and cons.
  • Opportunity Cost Spreadsheet
  • Other blogs and knowledge from other creatives. Favorite business podcasts are Business Boutique, Andy Stanley Leadership Podcast, Online Marketing Made Easy

Working expenses into the cost of your business

• • Open the Opportunity Cost Spreadsheet and look at the Expenses Table. This will give you a general overview of your expenses and how they relate to your Revenue and Profit goals.
  • Profit and Loss Sheet in Quickbooks for an itemized view at your expenses. This will be in greater detail. Be sure your books are up to date before analyzing this data.
  • You have to be able to make a profit above and beyond your expenses. This is the first step in calculating your pricing.
    • Another in-depth blog will be written on pricing in the future. Stay tuned 🙂

Thank you for joining us today on another educational blog. If you missed last week, be sure to check out our Opportunity Cost Calculator which will help you analyze your expenses and decide which one’s are the most beneficial for your business. It has been such a blessing to have you here today. Go out into the world and be a blessing! Until next week…

With Love,

Kelsea Vaughan