How to Calculate the Cost of Doing Business

by Eliah Sekirin ; Updated September 26, 2017
Entrepreneurs thrive when the costs of doing business are low.

The cost of doing business refers to all the expenses incurred by a firm or a sole proprietor in producing and selling goods or services. The cost of doing business depends on a wide variety of factors, including the cost inputs of goods and services, the costs of compliance with any regulations, interest rates on borrowed funds and taxes. The lower the costs of doing business, the easier it is for the business to operate, hire labor and pay taxes.

Analyze what costs your business needs to incur to get started and operate for a given period of time. Include the costs of registration and licensing, renting facilities, hiring employees, spending on advertising and other expenses.

Determine whether it is possible to minimize your costs. Maybe some costs can be cut without any detrimental effect on your business. Ideas to help you cut costs include hiring or leasing equipment instead of buying it, and doing less with resources you already have (labor, production capacity, computer systems).

Add up all the costs that your business will have in the given period. Still, you cannot produce something out of nothing, and certain costs must be incurred. When making business decisions, always include the costs of doing business in your calculations to determine the viability of a project.

About the Author

Eliah Sekirin started writing newspaper articles in 2003. His work has appeared in "Junij Poliyehnik" and on Web sites such as Prepodi.com. His writing interests are business, finance, economics, politics, arts, history, culture and information technology. Eliah holds a Bachelor of Science in econometrics from Kiev Polytechnic Institute.

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