Determining the True Cost of Doing Business As a Main Street Organization

SIMPLE STEPS:

Determining the True Cost of Doing Business as a Main Street Organization

Lorain Francis, Senior Program Director

Revised March 2013

The Maine Downtown Center is a program of the

295 Water Street, Suite 5 | Augusta, Maine 04330 | 207.626.3117 | 207.622.6345 | |

DETERMINE ACTUAL EXPENSES

DetermineStaff expense per hour:

For salaried or exempt employees:

Annual salary ÷ total number of hours worked a year (example: 2,080 is 40 hours a week x 50 week a year, assuming a two week vacation. $42,000 year = $20.19/hr) plus payroll taxes paid by the organization and benefits per hour. Note: Main Street Managers are usually Exempt employees, meaning they are decision-making managers who work as long as reasonably needed to get the job done and are not bound by x hours per week.

For hourly employees: Hour wage + payroll taxes paid by the organization and all benefits.

Determine Overhead: Separate operations expenses from program expenses to determine your true Overhead cost. Overhead is the total operations cost for the organization not including program expenses or salary, benefits and payroll taxes (which is calculated separately.) Overhead includes rent, heat, lights, insurance, internet, equipment, phones, fees/dues, janitorial service – anything that is absolutely necessary to operate the basic business function. Divide the total annual Overhead cost by the total budget to determine percentage. Use this percentage to add on to the hourly staff rate.

Determine your Fully Loaded cost per hour: Staff + Taxes and Benefits + Overhead. USE this number.

BUILD THE BUDGET

Create one master budget for the organization per year. Obtain your four committee budgets which include income and expenses PLUS a column for staff time and expense per hour at the fully loaded cost per activity. The Treasurer/President/Executive Director will craft and refine the master budget for full board approval, with recommendations to prioritize expenses in order to gain the highest return on investment (ROI).

DETERMINE ROI

Know your ROI for every event and activity. Weight the gain or loss based upon your mission and purpose of the activity. Not netting enough? More volunteers and/or more income and fewer expenses are the answer.

TRACK AND ANALYZE CASH FLOW – PREPARE FOR THE LEAN TIMES

It is the Board’s responsibility to know exactly how much is needed per month and per year to run the organization and to provide the means to cover those costs. Always look ahead at least six months to insure you have enough cash to pay staff and overhead, at a minimum.

The Maine Downtown Center is a program of the

295 Water Street, Suite 5 | Augusta, Maine 04330 | 207.626.3117 | 207.622.6345 | |