Expenses Rise For Small Firms

Mar 29 2014, 2:44pm CDT | by

Expenses Rise For Small Firms
Photo Credit: Forbes Business

If you’re feeling the pinch of higher expenses at your business this year, you have plenty of company.

When small and midsized business owners were asked what one thing keeps them up at night in a national survey released this month by PEX Card, the top response was “expenses eating into profits,” cited by 22% of business owners. Generating new sales was number two, accounting for 17% of responses.

Among the national sample of businesses surveyed at the end of 2013, 63 percent of businesses expected their spending to increase in 2014.

But not all of the spending is a bad thing. PEX founder and CEO Toffer Grant says that the uptick reflects, in part, businesses’ willingness to invest in growth. “People expect to have increased expenses due to improvements in business in general and the economy,”  he says. “I think it’s a very positive report.”

So where are owners spending more? The top categories showing an uptick were compensation for non-sales employees, health insurance, fuel and equipment repairs and maintenance.

Half of companies saw fuel spending rise in 2013, though gas prices have leveled off in many states or come down. For comparison, in 2012, more than 65% of companies saw their tab rise. For small firms with nine employees or less, the average fuel spending in 2013 was $20,500, compared to an average of $135,300 among firms with 10 employees or more.

When considering spending on fuel, it’s important to note that the survey skewed more toward contract businesses and skilled tradespeople, rather than retail firms, notes Grant. And their bigger fuel bills likely means they are busy. “You’re not going to put a truck on the road to burn fuel unless there’s a reason to do it,” he says.

While the cost of healthcare is going up for many firms, that often depends on the size of the business.

For instance, among firms that have up to 9 employees, only 36% expected the Affordable Care Act to affect their healthcare spending this year. Just 21% experienced an impact so far.

The picture was quite different for firms with 10 employees or more, where 58% of respondent predicted they would feel the effects this year. Among this group, 49% reported an impact so far.

Though salary expenses are rising at all firms, firms with 10 employees or more spend a greater percentage of their budgets here. Salaries for non-sales employees averaged 25% of their average budget of $2.3 million, or $580,600, in 2013.

In contrast, smaller firms spent 21% of their average $363,000 annual budget paying non-sales employees, averaging $77,300. It seems likely that a fair number of those surveyed were one or two-person businesses, based on the average salary expenditure.

The firms with one to nine employees average $6,900 a year in healthcare expenses. In contrast, those with 10 employees or more spent $180,000. (Ouch!)

Equipment repairs ran the firms that have one to nine employees $9,300 in 2013. For firms with 10 workers or more, equipment cost $74,400.

While small business owners may have to get creative to outrun these expenses, the increased spending in a couple of key areas could benefit the economy in some ways. For instance, when small firms spend more on salaries, it goes to employees. And the folks who repair the business equipment for these firms may be small business owners themselves./>/>

Hopefully, many businesses will see increased revenue this year to offset the expenses.

Source: Forbes Business

 
 

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