Selling costs refer to the expenses incurred by a business in the process of promoting and selling its products or services. These costs can include advertising, sales commissions, marketing expenses, and other costs associated with making a sale. They are typically subtracted from revenue to calculate a company's gross profit.
Types of selling costs
There are many different types of selling costs that a business may incur. Some common examples include:
- Advertising: costs associated with promoting products or services through various media, such as television, radio, print, and online advertising.
- Sales commissions: payments made to salespeople for their efforts in securing a sale.
- Marketing expenses: costs associated with creating and executing marketing campaigns, such as market research, public relations, and event planning.
- Travel and entertainment: expenses incurred by salespeople while meeting with potential customers, such as transportation and meal costs.
- Samples and prototypes: costs associated with creating samples and prototypes of products for customers to review.
- Trade shows and conventions: expenses associated with participating in trade shows and conventions, such as booth rental and travel costs.
- Sales promotion and discounts: costs associated with offering discounts or other incentives to customers to encourage them to make a purchase.
- Sales office and administrative expenses: costs associated with maintaining a sales office and administrative support staff, such as rent, utilities, and salaries.
Example of house selling costs
When selling a house, there are several costs that the seller may need to pay. Some common examples include:
- Real estate agent commission: a percentage of the sale price that is paid to the real estate agent who helped list and sell the property.
- Closing costs: expenses associated with transferring ownership of the property, such as title search fees, attorney fees, and escrow fees.
- Home staging: costs associated with preparing the house for sale, such as decluttering, cleaning, and making repairs.
- Home inspection: costs associated with having a professional inspector review the condition of the property before listing it for sale.
- Marketing and advertising: costs associated with promoting the property, such as creating listing materials and advertising the property online.
- Legal fees: costs associated with preparing and reviewing documents such as sales contract and title transfer documents.
- Property taxes and utilities: costs associated with maintaining the property until it is sold, such as property taxes and utility bills.
- Moving costs: costs associated with relocating to a new home, such as hiring movers or renting a moving truck.
- Capital gain taxes: taxes that may be due on the profit made from the sale of the property.
These costs will vary depending on the location, condition of the property, and the market conditions. It's important to consider all of these costs when pricing your property and budgeting for the sale.
- Borenstein, S. (1991). Selling costs and switching costs: explaining retail gasoline margins. The RAND Journal of Economics, 354-369.
- Anderson, M. C., Banker, R. D., & Janakiraman, S. N. (2003). Are selling, general, and administrative costs “sticky”?. Journal of accounting research, 41(1), 47-63.
- Weiss, L. W., Pascoe, G., & Martin, S. (1983). The size of selling costs. The Review of Economics and Statistics, 668-672.