Store overhead is not a fixed amount. It can vary considerably
depending on your type of operation. Also as with all expenses it
is something that is controllable and should be monitored in
order to see where savings can be made.
In order to determine what your overhead costs are you need to
categorize all of your expenses and calculate what percentage
they are of your gross sales. Tracking this data and establishing
benchmarks should be an integral part of managing a store. As you
establish a bank of historical data it can be used as a tool to
maintain or improve your profit margin.
For example, if you have established that your overhead
expenditures should be consuming 25 percent of you gross sales
and you see that they have crept up to 30 percent you would look
at the individual expenditures and determine which ones can be
reduced or eliminated. This type of number control is something
that can make or break a business. It is also something artists
and very small business don’t usually do.
The actual percentage of overhead relative to pricing is a
number that you have control over and can be manipulated to
change the amount of profit you show from sales.
If you consider all expenditures as overhead the process is
simplified. Let’s say your total expenditures are 90 percent of
your gross sales, that would mean you are making a 10 percent
profit. If you would like to have a 20 percent profit margin you
will need to increase your number of items sold, raise prices or
cut costs or a combination of the three. The choices are yours.