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  • Pro-Forma

Overhead Expenses


Q: I’m trying to enter the details of my office expenses, including the lease, the maintenance, the utilities, our coffee service, our cleaning service, etc. and I don’t see anywhere to enter that level of detail.


A: One of the first rules of business planning and financial modeling is to focus on what matters and not sweat the small stuff. Our recommendation is not to go to great lengths to detail relatively minor expenses. For this reason, we aggregate overhead expenses (other than staff-related expenses) into five categories:

  1. Advertising and Marketing Expenses

  2. Other R&D Expenses

  3. Occupancy Expenses

  4. Professional Services Expenses

  5. Other G&A Expenses

The items you are inquiring about are all bundled in our model under the G&A Expense called Occupancy Expenses. To enter those expenses, simply add each of them up and enter that total amount. This is a simple and easy way to handle minor assumptions that will not move the needle on your plan.


In terms of focusing on the important details, the vast majority of all costs in a startup are

  1. Direct expenses that are driven by your offering (product or service) assumptions and

  2. Employees

These two types of expenses usually total to 75% - 85% of revenue. Therefore, it is absolutely critical that you get your business model and unit economics correct to really understand those offering and employee-related expenses. Our financial model app was engineered to help you fine-tune that critical element of your plan with easy-to-follow input instructions.


The key takeaway is that if you don’t have your customer acquisition cost, price, direct expenses, direct labor, and gross margins figured out properly, it won’t matter whether your office maintenance expense was $50/month or $500/month.


If, however, you are building a manufacturing facility or fitness center, or other such business model where the facility expense is a significant part of your overall plan and how you deliver value to customers, then you would want to capitalize that investment, rather than expense it.

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