The Real Cost of Running a Business: Are you Spending in the Right Places?

Running a business means money is constantly moving — out to payroll, rent, software, contractors, marketing, and everything in between. But the question that separates stable companies from stressed ones isn’t how much they’re spending; it’s whether they’re spending in the right places. Sustainable growth depends on understanding which operating costs fuel your business and which ones quietly drain it over time. When you know the benchmarks, you can spot overspending early, redirect resources strategically, and build a financial structure that supports scale instead of fighting against it.

🔢 Understanding Operating Expenses in a Healthy Business

Across Canadian small and mid-sized companies, operating expenses typically consume 70–85% of annual revenue (Statistics Canada + BDC data). Within those costs, healthy organizations follow recognizable patterns:

• Labour: 15–40%

• Rent & utilities: 2–10%

• Marketing: 2–10%

• Insurance: 1–5%

• Office/admin: 2–7%

  
  

These are the core expense categories that keep a business functioning day-to-day. But one category holds the biggest influence over the accuracy, stability, and growth of every other: your finance function.

How Much Should a Business Invest in Accounting & Financial Operations?

A strong finance function is more than a cost—it’s a strategic infrastructure that protects profit, strengthens decision-making, and keeps your business compliant and scalable.

A helpful benchmark for many Canadian businesses is:

🔸 2–5% of annual revenue

or

🔸 4–12% of gross profit

allocated to the full finance function, including:

• bookkeeping

• payroll

• GST/HST compliance

• financial reporting

• year-end accounting

• advisory and financial oversight

  
  

This is different from the small 0.5–2% “professional fees” shown in Statistics Canada tables, which track only accounting and legal fees—not the ongoing financial operations required to run a functioning business.

Investing appropriately in your financial operations supports:

• clean, accurate financial reporting

• strong cash-flow visibility

• confident pricing and margin decisions

• fewer year-end adjustments

• lower risk of CRA errors

• easier access to financing

• smoother, faster scalability

Businesses with consistent financial processes tend to grow more sustainably because they’re not operating in the dark. They know their numbers, and they can trust them.

Why This Matters for Your Growth

When operating expenses shift out of balance—too much in labour, too little in finance, too much in marketing, not enough in compliance—businesses start to feel the strain:

• margins shrink

• cash flow becomes unpredictable

• decisions become reactive

• CRA filings fall behind

• growth stalls

Understanding the benchmarks isn’t about cutting costs; it’s about putting money in the right places so the business can grow on a stable foundation.

A well-funded finance function doesn’t just help you survive tax season—it helps you build a business that scales.