With Tax Day on the horizon, small business expenses are on entrepreneurs’ minds. But according to the most recent SMB Benchmark Expense Survey from PEX Card, this isn’t the only time of year when small business owners fret about their expenses. Asked what is the number-one concern that keeps them up at night, small business owners cited “expenses eating into profits” as their biggest worry.
No wonder. According to PEX Card, the average SMB spends nearly $1.25M on expenses annually. Those employing more than 10 people spend an average of $2.3 million, while even those with fewer than 10 employees spend an average of $363,000.
What’s the biggest of the small business expenses? Staffing, including sales staff compensation and incentives, healthcare insurance and workers’ compensation, eats up more than half of itemized expenses. The smaller the business, the more is spent on staffing proportionately–companies with fewer than 10 employees spend over two-thirds of their total expenses on staffing, while those with more than 10 employees spend just over half of expenses on it.
Smaller companies also spend a bigger proportion of their staffing expenses on sales-related employees. Those with under 10 employees spend nearly 70 percent of staffing expenses on sales-related staff, while those with more than 10 employees spend less than 30 percent on this.
Marketing and sales costs (including the cost of sales compensation) accounts for 28 percent of expenses on average. As with the other costs, smaller companies with under 10 employees spend a bigger proportion of their expenses (50 percent) on marketing and sales.
The one area where bigger companies (with over 10 employees) spend more is on equipment and office supplies. This accounted for 11 percent of their expenses, but just 6 percent of expenses for smaller companies.
And while the cost of health insurance gets a bad rap as a huge burden on small businesses, in reality it accounts for less than 2 percent of expenses for companies with under 10 employees and just 7 percent of expenses for companies with 10 or more employees. Just one-third of respondents say the Affordable Care Act has affected them so far, although 47 percent expect that it will at some point.
Finally, one thing almost all businesses have in common is that their costs aren’t going down any time soon. A whopping 92 percent of companies say their expenses will either stay the same or rise this year; only 8 percent expect them to drop.
How do your business’s expenses compare with these benchmarks?
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