Do you know how much/what a cost of doing business is?

A relative of mine owned a small business and had about 60 some employees. His business was faltering and he ended up losing everything. When I was talking with him about the course of events that caused everyone to loose their jobs, which he felt like he had let them all down because he thought of most of them like family. He explained much about the cost of doing business I hadn’t thought about. In order to stay in business you must be competitive so all of your costs have to be controlled as much as possible. The things I always thought that the corporations paid after all of their profits was taxes, not so taxes are part of the cost of doing business. He said if he couldn’t calculate his projected tax bill including regulation requirements, licenses fees, property taxes and corporate taxes just like employee wages and benefits, he wouldn’t know what to charge for his product. He said if he moved to another state he could have probably saved his business. He said the reason for moving to another state would have been lower wages, fewer regulations, lower taxes, lower energy costs etc.

I asked why he would pay somebody in another state less money, he said that the cost of living in that state was much less and the people can live just as well maybe even better on the lower wages he would pay them. How could anyone live just as well with lower wages that sounds ridiculous and his response is less taxes and smaller government lessens the tax burden on everyone including businesses like food markets, gas stations, barber shops, home builders etc. and the result is lower prices. I have noticed that in some parts of the suburbs gas is always higher and I thought it was because it was the richer suburbs and they could afford it when the real reason is taxes there are higher so the business must charge more. I’m still learning and would like your thoughtful input! Please don’t give that crap about greedy corporations because my relative really felt very bad about all of his employees loosing their jobs and regrets having failed them more than anything else.

Update:

Justine 3: You don’t sound like my employer! I was requesting thoughtful input; maybe yahoo is the wrong format.

Update 2:

juistagra.. :To presume as you have in your first statement shows your complete failure to understand the problem! First, You IDIOT, what was his business and did he have any competitors in his state? How much does the city charge him annually to place a sign on his building outside his place of business? What cities do not charge this sign fee that must be passed onto the customer. I’m sorry that I resorted to name-calling but don’t you think you should use some common sense when replying to a sincere question.

Update 3:

Bflowing: ??? What article did you read? Where in this article do I mention INCOME TAX ? I don’t know of any business even when faltering that becomes exempt from license fees, property taxes, regulatory fees, corporation fees, inspection fees, S.S. taxes, etc. Do you remember the part about thoughtful input.

4 Answers

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  • ?
    Lv 5
    9 years ago
    Favorite Answer

    It is pretty clear from the answers you have received that none of them know the first thing about business! I worked for a big company here in Michigan and it really didn't bother them when the workforce became unionized in many cases labor costs actually went down. When the state and city increased taxes and regulatory fees the company moved all of its operations to PA. Even having the majority of their customers in MI they could still operate more efficiently due to removing the heavy tax burden. This company’s main office is in Europe.

    Source(s): Personnel experience
  • justa
    Lv 7
    9 years ago

    Unless everyone else in his state went out of business your relative was making excuses.

    For one thing the cost of doing business includes raw materials, or purchasing parts, it also includes all those taxes, fees, property taxes, wages and benefits.

    Businesses have gone out due to mismanagement for years now, and I doubt you'd find one businessman who said it was because he didn't know how to move with the times, or it was because he didn't know when to charge more, or when to know the need for his product was over and done.

    What he didn't take into consideration is that if he'd moved to pay less in taxes or wages, that wouldn't encourage his workers to buy his product either, and if all businesses did that there would be no one left with large enough salaries to buy products. And guess what? That's pretty much what has happened, in the quest to lower costs, they fired people, went overseas, paid less to manufacture, and now they can't sell their products to those who are unemployed.

    You don't say what business he was in, so its hard to tell, some get into trouble because they just aren't good businessmen. They overexpand or overextend, or the they play games with money.

    With the best intentions in the world, they just don't look into what they do before they do it.

    So they don't know what they need to do legally and then they get all upset about the regulations, but the regs were there, not knowing about them isn't an excuse.

    Gas isn't higher in the suburbs, it's cheaper, and the reason its cheaper is because the land is cheaper and it costs them less to rent it. Few gas stations own their property. The landlord pays the taxes on it.

    If your relative has your temper, its no wonder he went out of business. I have an excellent idea of what it takes to run a business, my family owned restaurants, and I owned a decorating company.

  • 9 years ago

    First, no business adds an estimated cost of income taxes to their pricing. If that was true, highly successful companies would charge more than marginal ones.

    Secondly, if his business was faltering then his income tax would have been minimal.

    In fact, if he had a loss not only would he have owed no income tax, but its possible he could have gotten a refund from prior years.

    All his competitors were operating under the same conditions. How did they survive?

    Finally, its demand not the tax burden that determines price.

    Edit: I did read it very carefully, including the part where you stated he couldn't project his tax bill.

    All the items you mentioned, he could estimate, except for his corporate income tax.

    I think the real reason he went out of business was a low demand for whatever his business was, and the competitors were better. He is just looking for excuses.

    But hey, its just my thoughtful input.

  • 9 years ago

    yes i do , i own one, i am the owner therefore i dictate policy and wages , if you dont like it go look someplace else, this is a dictatorship not a democracy

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