How Do You Recommend Calculating Overheads For Your Business?

[Mrs.Clooney]

I really would not know where to start. I have a home based salon so all my electrical costs, cost for laundry, hot water etc....... fall in with household costs. Now I do need to charge something for overheads, but really don't know how to achieve a realistic assessment of this.

Any pearls of wisdom please?

 

[alpina]

I don't know if this is the most accurate way of calculating this, but here's what I do. Work out what percentage of the total house is your salon. Say your salon takes up 20% of the total house area, then I'd add an extra ten percent to this - my reasoning for this is that the salon probably uses more electricity/phone calls than the average house due to wax pots, airconditioning, etc being on all day. You probably do a lot more washing for the salon than the house too.

Anyway working off those figures, the salon uses 30% of the household total so you should be able to figure out an estimate based on that.

Hopefully someone else comes along with a much better idea than this, like I said it's probably not the best way to work this out but that's the only way I could think of when calculating my costs.

 

[jes]

Yes you are supposed to work out what percentage of your house is used for your home salon, but the tax man will insist that it is realistic. I doubt they would allow you to add an extra 10% to an area of 20% .

If the area of your salon is 20% then you can claim 20% of electricity, heating, water, council tax etc.

You can claim a percentage on your telephone bill, but it's really awkward coz you have to work out the percentage used by separating the home and business calls from the itemised bills and then working out the percentage used from that... personally I think it's better to have a separate phone line fitted, then you just claim 100%.

Doing laundry at 60 deg is expensive, I'd find out how much your local laundrette charges for a wash and dry and the use that price for every washing load you do. As with everything to do with tax write every washing load done in a diary and every 30 washes or so keep a washing powder receipt.

Having said all this there is a spanner to throw in the works! Apparently if you do declare that a percentage of your house is used solely for business the local authorities might want you paying business rates and you may have to get business insurance! Have a read of this for more info; Running a home office - can you claim on expenses?

 

[Sharkster]

I was advised by the Inland Revenue that if you have 7 rooms in your house excluding bathrooms & hallways you can charge 1/7th of your household utility bills to your business. If your room is only used for Beauty 50% of the time then it's 50% of 1/7th of the bills. I hope that makes sense?

They also advised me to think hard before before charging a portion of the mortgage to the business as this will leave you liable for capital gains tax when you sell the house as you will in fact be selling a house and a business.

I hope this helps!

 

[alpina]

I wasn't suggesting that anyone used my method for claiming costs back on tax

I though Tracey meant an estimate of overheads to use as a guide for setting treatment prices

 

[footwoman]

Hi there,
You can download a business plan from the Alliance and Leicester website - sorry I don't have the link.
Hope that helps.

 

[Lynne Baker]

https://www.alliance-leicestercommercialbank.co.uk/content/SU080014.asp

 

[Mrs.Clooney]

I though Tracey meant an estimate of overheads to use as a guide for setting treatment prices

Yes, you are correct. I need a guide to helping me set my treatment prices eg. cost of products per service + overheads (electricity, water, telephone, stationary, postage etc......) + salary/hour. This should equal treatment price...... shouldn't it?

It's the actual overheads I don't know how to calculate. Thank you for your replies Geeks.