Cost Model: Key Tool for International Companies

Wanting to Start Up Business in Mexico

When considering starting up or relocating manufacturing operations to Mexico, one of the first steps and most valuable tools in the decision-making process is receiving a cost model. This estimate provides international companies with an idea of what their expenses will be to operate and consolidate operations here.

Though there are five main categories of expenses—labor, building, logistics, administrative costs, and others—they can vary drastically depending on many factors, such as the type and size of your operation and the location in Mexico you choose. When requesting a cost model, it is a good idea to contact a shelter provider in Mexico that will include all the details for each category so that you don’t run into any surprises down the road in the true operating costs per hour for your business.

When estimating the first category, labor, you will want to consider the fully loaded cost for salaries, benefits, and taxes. It is critical to understand the variety of expenses included in this other than daily wages, such as the basic, mandatory, and additional benefits you will need to offer to ensure compliance with tax and labor laws and keep turnover to a minimum.

Next are building costs. These include some more obvious costs like building rent and process and building utilities, in addition to others that are more easily overlooked, such as triple net expenses, property taxes, insurance, maintenance fees, park fees, and building fees.

Then there are logistics costs. These include inbound and outbound freight and broker fees, among others. It is important to note that these are lower for border locations than for central Mexico and will also vary based on the type of transport used (full or partial truckloads, railroad, or air transport), the cost per mile or kilometer, as well as insurance and security escort, depending on the load value.

Another critical category is administrative costs. These include human resources, accounting services, fiscal compliance, customs coordination, and duties optimization, legal operation, environmental permits, labor management, and union relationships. Contemplating these allows you to avoid fines, delays, or even a costly shutdown. The last category includes miscellaneous costs, such as security, cleaning, safety, office supplies, and internet, among other operation-specific expenses.

Though some shelter providers may tend to omit some of these factors in their costs models to give a more competitive image, when contacting American Industries Group you can be sure that you will receive a model that offers you a complete and accurate idea of the cost of doing business. To do this, the first step in obtaining a cost model is to fill out a completely confidential questionnaire where you will be asked to provide details about your specific operations. This information allows American Industries to provide you with a custom and highly precise estimate of the actual cost of doing business, ensuring you the best information to use in your decision-making process.

If you are considering nearshore or offshore manufacturing in Mexico and would like to request your tailored cost model, reach out today, and we would be happy to help.

By Jorge Baca | Queretaro Regional Director | American Industries Group®

If you would like to find out more about this topic or are interested in receiving a complimentary business case analysis for your operation in Mexico, please fill out this form or contact us at:

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