Overhead

How much is enough?

Do you charge what your overhead actually is or what it should be? Let's face it, if you are running a one truck show out of your garage but want to grow, do you charge enough to cover the office, staff and equipment you don't yet have or the office, staff and equipment you actually have?

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As I've been taught, overhead is what stuff is costing me now plus any short-term increases in operating costs. Funds for expansion are taken out of profits. Therefore, if you choose to expand, you've got to build in sufficient profit to cover your anticipated capital equipment aquisition(s).

Of course, if you are financing the capital equipment, then the financing costs become part of general overhead, and you use the profits to repay the principal of the loans.

Did I understand your question correctly?>>>

pgriz - Yep. I think you nailed it.

I guess I'm wondering how other perceive it. >>>