Managing Overhead Expenses: A Guide for Small Craft Businesses
Paying attention to finances has to start before you open for business on day one. While the prospect of doing this doesn’t excite many entrepreneurs, failure to do so greatly reduces your chances of success.
Controlling expenses is just as important as generating sales. All the sales in the world won’t yield a profit if your spending exceeds a sustainable rate. Here are some ideas on how to monitor and manage the way you spend your money.
Overhead costs refer to the ongoing expenses required to run your business—but not directly tied to making a specific product. These might include rent, utilities, internet, packaging supplies, software subscriptions, or even insurance.
Understanding what overhead costs are in your business helps you separate production costs (like raw materials) from operational ones. For example, if you make candles, the wax and fragrance oils are product costs, while the electricity to melt wax, your studio space, and your website fees are overhead expenses.
There are two main types of overheads to track:
To get a handle on your overhead, begin by reviewing your past few months of spending. Identify any recurring payments that aren’t directly tied to making your products—this includes expenses like your workspace, utilities, internet, website hosting, and business software.
Once you’ve gathered a list of these operating costs, categorize them as either fixed (those that stay consistent, like rent or web hosting) or variable (those that shift depending on sales, like shipping supplies or credit card fees). This distinction helps
Controlling expenses is just as important as generating sales. All the sales in the world won’t yield a profit if your spending exceeds a sustainable rate. Here are some ideas on how to monitor and manage the way you spend your money.
Overhead costs refer to the ongoing expenses required to run your business—but not directly tied to making a specific product. These might include rent, utilities, internet, packaging supplies, software subscriptions, or even insurance.
Understanding what overhead costs are in your business helps you separate production costs (like raw materials) from operational ones. For example, if you make candles, the wax and fragrance oils are product costs, while the electricity to melt wax, your studio space, and your website fees are overhead expenses.
There are two main types of overheads to track:
- Fixed overheads: Costs that remain constant regardless of how much you produce (e.g., rent, web hosting).
- Variable overheads: Costs that fluctuate based on your production or sales (e.g., shipping supplies, credit card fees).
To get a handle on your overhead, begin by reviewing your past few months of spending. Identify any recurring payments that aren’t directly tied to making your products—this includes expenses like your workspace, utilities, internet, website hosting, and business software.
Once you’ve gathered a list of these operating costs, categorize them as either fixed (those that stay consistent, like rent or web hosting) or variable (those that shift depending on sales, like shipping supplies or credit card fees). This distinction helps
