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Key Takeaways
- The baseline monthly fixed overhead, including salaries and overhead, is projected to be around $20,100 in the first year of operation.
- Variable costs, dominated by inventory procurement (COGS at 135% of revenue), represent the largest recurring cash outflow, totaling 200% of revenue initially.
- To reach the targeted 3-month break-even point, the business requires a critical upfront cash buffer of $864,000 secured by February 2026.
- Immediate solvency depends on controlling the starting Customer Acquisition Cost (CAC) of $250 and reducing the high variable expense ratio through optimization.
Running Cost 1 : Product Inventory Procurement
Inventory Cost Shock
Product inventory cost is the single biggest drain on gross margin, hitting 120% of projected 2026 revenue. You must manage sourcing costs aggressively because this expense scales directly with every sale you make. That means your Cost of Goods Sold (COGS) must shrink fast.
Cost Inputs
This expense represents the actual wholesale price you pay suppliers for the items you resell. To estimate this accurately, you need firm supplier quotes and a clear projection of unit sales volume for 2026. Since it is 120% of revenue, this cost immediately puts your gross margin negative before accounting for logistics fees.
- Wholesale unit cost per SKU.
- Projected 2026 sales volume.
- Supplier payment terms negotiation.
Cost Control Levers
Controlling inventory cost requires negotiating better terms or finding cheaper suppliers without sacrificing the curated quality. Avoid defintely overstocking slow-moving items, which ties up cash unnecessarily. A key tactic is leveraging volume discounts early on to drive down the unit price.
- Negotiate volume tiers with suppliers.
- Test small batches before large buys.
- Review COGS against target margin monthly.
The Margin Reality
Given that inventory is 120% of revenue, your entire business model hinges on increasing your Average Selling Price (ASP) or finding ways to lower wholesale cost below 100%. If sourcing costs stay this high, you’ll never cover operational expenses like outbound shipping (40% of revenue) or fixed overhead.
Running Cost 2 : Inbound Logistics Costs
Inbound Cost Control
Inbound logistics is a major variable expense you must control now. Expect inbound freight, customs, and handling fees to consume 15% of your total revenue by 2026. If you don't track these costs from supplier to your 3PL, profitability disappears fast.
Inputs for Estimation
This cost covers moving goods from the supplier dock to your third-party logistics (3PL) facility. To estimate accurately, you need quotes for freight, import duties (customs), and any supplier-side handling charges. This 15% figure is significant compared to inventory cost, which is 120% of revenue.
- Track freight quotes by weight/volume.
- Calculate customs duties percentage.
- Factor in supplier loading fees.
Reducing Logistics Fees
Reducing inbound friction means negotiating better Incoterms (shipping terms) with suppliers. Aim to shift more responsibility onto the supplier, defintely cutting your direct freight exposure. Consolidating shipments avoids high per-unit costs for small, frequent orders.
- Negotiate Free On Board terms.
- Consolidate supplier purchase orders.
- Review 3PL receiving fees quarterly.
Landed Cost Reality
Your total landed cost is inventory plus inbound logistics. If your 120% inventory cost plus 15% inbound logistics exceeds your selling price margin, you lose money before marketing or overhead. Focus on supplier density to cut per-unit freight spend.
Running Cost 3 : Outbound Shipping & Handling
Shipping Cost Weight
Outbound Shipping & Handling is a major variable drain, set to consume 40% of revenue in 2026. This cost covers everything needed to get the curated product from your warehouse to the final buyer, defintely impacting gross margin stability.
Inputs for Shipping Budget
This expense bundles packaging materials, the direct labor needed for picking and packing orders, and the actual carrier shipping fees. To budget accurately, you need unit volume forecasts multiplied by negotiated carrier rates and packaging supply costs. It’s a critical cost tied directly to successful fulfillment volume.
- Packaging supplies cost per order.
- Warehouse fulfillment labor rate.
- Average carrier rate per zone.
Controlling Fulfillment Spend
Reducing this 40% burden requires optimizing carrier contracts based on projected shipping zones and volumes. Negotiate better rates by committing to specific carriers or utilizing regional providers for dense markets. Avoid paying retail rates for every shipment, which eats margin fast.
- Consolidate volume with fewer carriers.
- Design lighter, right-sized packaging.
- Shift fulfillment labor efficiency metrics.
Margin Sensitivity
Because this is variable, its relationship with inventory procurement (120% of revenue) and inbound logistics (15% of revenue) determines true landed cost. If your average order value (AOV) is low, this 40% shipping cost will quickly erode contribution margin.
Running Cost 4 : Core Team Salaries
Payroll Commitment
Initial payroll sets a high fixed bar for the business. In 2026, staffing 20 FTEs, including the CEO and fractional support for Marketing and Operations, demands $16,042 monthly. This cost must be covered regardless of sales volume.
Staffing Inputs
This $16,042 monthly expense covers 20 full-time equivalents planned for 2026. The team structure includes the CEO role, plus outsourced or part-time (fractional) support for crucial functions like Marketing and Operations. You need headcount plans and average loaded salaries to calculate this figure.
- Headcount: 20 FTEs
- Roles: CEO, fractional Mktg/Ops
- Timing: 2026 monthly run rate
Managing Fixed Headcount
Since this is a fixed commitment, control headcount carefully early on. Using fractional roles for Marketing and Ops keeps specialized expertise available without the full burden of permanent salaries. If onboarding takes 14+ days, churn risk rises. Avoid hiring full-time until revenue reliably covers this overhead.
- Use fractional roles first
- Hire based on utilization, not projection
- Keep CEO salary low initially
Fixed Cost Impact
This $16,042 salary baseline must be absorbed before variable costs like inventory procurement (which is 120% of revenue in 2026) start generating profit. You need high gross margins to cover this payroll before scaling customer acquisition spend.
Running Cost 5 : Customer Acquisition Spend
Budget vs. Volume
Your $80,000 annual marketing spend buys you only 320 new customers if you hit the target CAC of $250. This volume is the hard limit your current budget sets for growth this year, so plan your revenue targets around this acquisition ceiling.
Budget Capacity
This Customer Acquisition Spend covers all digital ads, content creation, and promotional costs to bring a new buyer to checkout. The math is simple: divide the $80,000 annual budget by the $250 target CAC. That gives you 320 customers annually, or about 27 per month.
Hitting CAC
You must ensure the Lifetime Value (LTV) of these 320 customers significantly exceeds $250. If your Average Order Value (AOV) is low, you'll need repeat purchases fast. Defintely monitor conversion rates weekly; a 1% drop in conversion means you buy fewer customers for the same spend.
Acquisition Reality
If you need 1,000 new customers next year, you must raise the marketing budget to $250,000, assuming CAC stays constant. If you can't raise capital, you must drive down CAC below $66.67 monthly ($80k / 12 months) to acquire enough volume.
Running Cost 6 : Essential Software Subscriptions
Fixed Software Spend
Your baseline fixed software expense is $800 per month, covering the core e-commerce engine and essential customer data tools needed for this reseller operation.
Cost Breakdown
This $800 is pure fixed overhead. It splits between the primary e-commerce platform fee of $500 and licenses for analytics and Customer Relationship Management (CRM) tools, totaling $300. These are necessary to run the digital storefront and track buyers.
- E-commerce platform tier cost.
- Number of CRM/analytics user licenses.
- Annual vs. monthly contract rates.
Cost Control Tactics
Managing this spend means scrutinizing usage, not just the sticker price. Many startups overpay by keeping unused CRM seats or paying for premium platform features they don't need yet. Review these contracts defintely every quarter.
- Audit unused analytics seats quarterly.
- Negotiate annual commitments for discounts.
- Downgrade platform tiers if traffic is low.
Overhead Context
Compared to your $16,042 core salaries and $3,300 administrative overhead, this $800 is small but critical fixed spend. Small software costs still add up fast if you ignore them.
Running Cost 7 : Administrative Overhead
Baseline Overhead
Your baseline administrative overhead is a fixed $3,300 per month, which must be covered regardless of sales volume. This cost sets a non-negotiable floor for your monthly operational burn rate.
Fixed Cost Breakdown
This $3,300 covers essential, non-volume-based fixed costs for the reseller. Inputs come from signed quotes for office rent, the 3PL base management fee, and retainer costs for accounting/legal services. This is your defintely minimum monthly burn before payroll.
- Office Rent: $1,200
- 3PL Base Fee: $1,000
- G&A (Legal/Acct): $750
Controlling Overhead
Manage this fixed cost by challenging the $1,000 3PL base management fee if volume is low, or by considering a smaller virtual office to cut the $1,200 rent. Legal costs are usually fixed, but review service agreements quarterly.
- Negotiate 3PL minimums down.
- Use virtual office space first.
- Bundle legal/accounting services.
Overhead vs. Payroll
This $3,300 is pure fixed overhead that must be covered by gross profit before you even pay the $16,042 core team salaries. Every dollar of contribution margin must first clear this hurdle.
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Frequently Asked Questions
Fixed operating costs (salaries and overhead) are approximately $20,142 monthly in 2026 On top of this, variable costs like inventory procurement and fulfillment add another 200% of gross revenue, making inventory management the key cash flow challenge;