Week Four

Business / Project Plans & Communication | Client Relationships, Insight, Content, Structure

Research

Overheads

Overhead costs, sometimes called operating expenses, are expenses associated with running a business that can be linked to creating or producing a service. They are the expenses the business incurs to stay in business, regardless of it’s success level. Overhead costs represent all of the costs on the company’s income statement except for those that are directly related to manufacturing or selling a product, or providing a service. A company’s overhead expenses will vary depending on the nature of the business but typical examples include: rent, utilities, insurance, salaries, stationary and office equipment. There are four types of overheads:

Production Overheads: costs associated with running a production process, such as machinery maintenance, rent, utilities, and depreciation.

Administrative Overheads: Costs associated with running a business such as employee salaries, rent, office supplies, insurance, and professional services.

Selling Overheads: Costs associated with marketing and selling products such as advertising, promotions, and commissions.

Financial Overheads: Costs associated with managing finances such as accounting, auditing, and taxes.

Here is a list of the overheads that I believe will be involved with my business: adobe creative suite, website costs, salary, telecommunication, insurance, accountancy fees, office supplies, marketing and utility bills. To calculate my overheads, I used average prices and paid myself an average junior graphic designers’ salary. Therefore, they are not completely accurate however I expect them to fluctuate with inflation and it gives me a rough idea of what costs to expect. In my business plan I will include my monthly overheads and my annual overheads, after I have worked out the monthly overheads I will multiply them by 12 to get the annual overheads.

Forecast Financial Statements

Financial forecasting is predicting a company’s financial future by examining historical performance data, such as revenue, cash flow, expenses, or sales. This involves guesswork and assumptions, as many unforeseen factors can influence business performance. Forecasting is important for planning purposes, it is necessary to estimate and plan for costs that will be incurred prior to actually incurring them.

To create my forecast financial statements, I first worked out my revenue cost for 2024. I based my calculations on the average junior graphic designer freelance rate of £200 per day and then multiplied this figure by the average amount of working days in a year (based on a 5 day working week minus bank holidays) which I worked out to be 220 days. I then got my costs figure from my total overheads and worked out my gross profit by taking my costs figure from my revenue. Then after deducting the 20% tax, I am left with my NET profit value. I then went on to calculate my 2025 projections, where I did the same calculations but used different figures. These projections are based on the average junior graphic designer rate of £240 a day however, I still used 220 average working days. I increased my annual overheads figure by about 7% to get my 2025 costs figure and then calculated my gross profit, tax and NET profit.