Overheads are sometimes called fixed costs - they're the costs that are there whether (in our example) you sell 10 sandwiches a week or 100 sandwiches a week. Depending on the level of detail you need, you could split your overheads into fixed overheads (such as rent, rates broadband fixed fees) and variable overheads (telephone, electricity etc).
It's not always easy to estimate your overheads at start-up. But try as hard as you can to be realistic - maybe by talking to people who've run similar businesses - and by getting real quotes from suppliers.
The headings you choose for overheads will depend on your business, but are likely to include things like:
Salaries - including any Employers National Insurance Contributions - there's more information here, but remember that you will need to budget for at least 12% above the gross salary figure to allow for NI contributions.
Pension contributions - will you have a pension scheme, and will you as an employer contribute? You are obliged to offer a stakeholder pension scheme if you employ five or more people, but you are not obliged to contribute - although many businesses do.
Gas and Electricity - you could look for good deals - and green deals - here.
Repairs and Renewals - a budget-line for when things go wrong
Cleaning - just materials? - or will you employ a cleaner?
Refuse collection - it's not usually included in Business Rates these days - and depending on where you live your Local Authority may not do it - so you'll need to find a commercial refuse collection service. If you're in Leeds, 3b are a popular choice - and you can get a quote from their website.
Rent - don't forget to check if the quoted figure includes VAT.
Business Rates - the current occupier, the landlord or the Estate Agent should be able to tell you the rateable value of the property. To work out how much you'll pay, you multiply the rateable value by the multiplier, which is set by Government each year. For 2007/08, the multiplier if 44.4p.
So, if the rateable value is £10,000, you will pay £4,440 in business rates (unless you can get business rate relief) Remember the rateable value isn't the same thing as the rent that you're paying - in many cases (fortunately) the rateable value will be lower than the rent you're paying.
Telephone and Internet - for the ethical option you could try the Phone Co-op - we've found their line rental and call charges to be good value.
Travel expenses - including public transport, and mileage for car and bicycle use.
Marketing - what will you spend to promote your business - to perhaps include a website, flyers, headed paper, business cards and any other promotional activities and materials.
Insurance - if you're setting up in business, you'll need Employers Liability Insurance - and perhaps some other types of insurance. You can get an idea of what you might need at the Business Link website.
Stationery - paper, pens, printer cartridges and the like.
Legal and professional fees. For example, you might need pay a solicitor to look at your lease and an accountant to look at your books.
Finance charges - if you are taking out a loan, or will have an overdraft, you'll need to include the interest charges and any other costs here.
Now that you've listed all your overheads, add them all up. In our cafe example, let's say that our overheads are £45,000. Now that you've added up your overheads, you can work out what your projected net profit (or loss) will be - we'll look at that soon - once we've added in your start-up costs - the subject of our next blog.