Cost of Doing Business Calculator
Table of contents
What is the cost of doing business?How to calculate the cost of doing business?FAQsWith this cost of doing business calculator, we aim to help you calculate the total operating cost per day for the business.
We have written this article to help you understand what the cost of doing business is and how to calculate the cost of doing business. We will also demonstrate some examples to help you understand the process used in the calculations.
What is the cost of doing business?
The cost of doing business (CODB) is the total operating cost of a business measured on a per-day basis. Essentially, it is the amount of money it takes to run a business for a day. You can check out our operating cash flow calculator to understand more on this topic.
The CODB varies by industry, so it is difficult to put just one number to the question of what a good cost of doing business is. The right way to do it is to compare the cost of doing business of your company to your close competitors in the same industry.
Suppose your cost of doing business is lower — congratulations, your business is probably more efficient than your competitors! If your cost of doing business is higher, you would probably like to look deeper into your business and improve its operation in order not to lose an advantage to your competitors.
Now that you understand the definition of the cost of doing business, let's look at its calculation.
How to calculate the cost of doing business?
To understand the calculation of the CODB, let's take Company Alpha as an example. Their total annual cost is $600,000, and they have 200 billable days per year.
You can calculate the cost of doing business in three steps:
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Determine the total annual cost
The first step is to determine the business'
total annual cost. This is the total cost it takes the business to run for a whole year. For Company Alpha, thetotal annual costis$600,000. -
Determine the total days per year
Next, we need to know what the total
billable days per yearfor the business is. This is the number of days the business is operating in a year. It can also be the number of working days for the business.In our example, the
billable days per yearfor Company Alpha is200.You can check out our billable hours calculator and bill rate calculator to understand more about this topic.
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Calculate the cost of doing business
The last step is to calculate the CODB using the formula below:
cost of doing business = total annual cost / billable days per yearThus, Company Alpha's
cost of doing businessis$600,000 / 200 = $3,000.
Can the cost of doing business be negative?
No, the cost of doing business cannot be negative. This is because neither the total annual cost nor the total billable days per year can be negative. Since the equation is a simple division, the cost of doing business will be positive too.
How do I calculate the cost of doing business?
You can calculate the cost of doing business (CODB) in three steps:
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Determine the total annual cost.
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Determine the total billable days per year.
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Apply the cost of doing business formula:
cost of doing business = total annual cost / billable days per year
What is the cost of doing business if the annual cost is $300,000 and it functions 200 days per year?
The cost of doing business is $1,500. You can calculate this by dividing the total annual cost ($300,000) by the total billable days (200).
What factors affect the cost of doing business?
There are a number of factors that can affect the cost of doing business, including the size and location of the business, the type of products or services provided, the cost of labor, the cost of materials, the cost of utilities, and any associated taxes.