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In the business world, there are usually ongoing expenses required to maintain a business and keep it running. The common name to describe these expenses is called overhead costs. In order to get a better understanding of overhead costs, it's important to know what some of the most common types are. These include rent, utilities, supplies, marketing costs and taxes.
The cost of renting a facility to operate a business is one of the most common overhead costs. Unless the business is operated completely online, it will have to either continually pay rent or purchase a facility. As a result, this is often one of the most necessary and expensive overhead costs. Rent can be particularly expensive when operating a large scale business or renting in a competitive location in a big city.
Utilities are another expense that go hand in hand with paying rent. In order to power a business with basic necessities like electricity, lighting, plumbing and Internet access, it will have to pay utility costs on an ongoing basis. Otherwise the business would be incapable of functioning in most cases. Generally speaking, the larger the facility is, the higher the utility costs will be.
Supplies are one of the overhead costs that can vary considerably from business to business. For example, a computer repair business would most likely have minimal supply expenses while a convenience store will have significantly more supply expenses. The computer repair shop would only need to order computer parts while the convenience store would have to order a large number of products like snacks, beverages, cigarettes and newspapers on a frequent basis. Consequently, supplies can be one of the main overhead costs for some businesses and only a minimal cost for others.
Marketing costs are another expense that can vary between different businesses. In order to attract new customers, most businesses will implement some form of marketing strategy. Some examples on the small scale include placing ads in local magazines and setting up a website. Examples on the large scale include placing an ad on a billboard or putting commercials on television. As a result, these can make for either minimal overhead costs or potentially huge ones.
In addition, taxes are another operating cost that apply to nearly all businesses besides some non-profit organizations. Whenever payroll gets done, the designated percentage of tax money must be paid. Otherwise, legal complications and fines or imprisonment can take place. Consequently, almost all business are held accountable for paying taxes.