Expenses Outpace Sales As The Leading Cause Of SMB Concerns
Written by Tim Morral
Almost one in four owners of small and medium-sized businesses cite rising expenses as the concern that keeps them up at night as staffing costs total more than half of all itemized business expenses.
We've all heard the tired adage that it takes money to make money. But according to owners of U.S. small and medium-sized businesses, the amount of money it takes to do business is something that keeps them awake at night.
A recent SMB Benchmark Expense Survey by PEX Card, a provider of prepaid business debit cards for SMBs, showed that 22 percent of SMB owners' biggest concern is that expenses are eating into business profits. Other top concerns cited by respondents included generating new sales (17%), not growing fast enough (13%), time management (12%) and managing employees (9%).
With respect to the Affordable Care Act (Obamacare), the PEX Card study found that Obamacare affected larger companies (those with more than 10 employees) more than smaller businesses. Interestingly, only a third of all companies have noticed any impact so far and only half expect to feel an impact later in 2014.
Other findings from the study included:
- Staffing costs (i.e. compensation, incentives, health care benefits, workers comp) represent an average of 56 percent of itemized expenses.
- Companies with more than 10 employees spend more than half of their total expenses on staffing; companies with fewer than 10 employees spend an average of two-thirds of their total expenses on employee-related costs.
- Marketing and sales expenses (including compensation) averaged 28 percent of SMB expenses, with higher percentages reported by smaller firms.
- Larger SMBs shelled out more than $130K per year on equipment and office supplies (11% of total expenses), while smaller companies spent less than $25K (6% of total expenses).
- Almost two-thirds (63%) of businesses surveyed expect spending totals to rise even higher this year.
For all SMBs, the use of benchmarks can play an important role in creating a realistic projected budget. By better understanding how your company's costs compare to other firms of similar size, you can improve your ability to manage expenses on a go-forward basis.
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