This means that 49% of your revenue is used to cover prime cost. Follow an IT roadmap that defines your broader IT strategy over the next few years. Are you spending too much on logistics to keep up with rising fulfillment costs? ... What percentage of sales should you spend on logistics? What Percentage of a Company's Revenues Should Go to Rent and Expenses?. Richmond’s solid bottom line is attributed to a favorable decline in operating expenses by 1.7 percentage points along with a complementary increase in revenue by 2.4 percentage points. Learning your unit cost can keep your small business profitable. For example, if February sales are $65,000, then your prime cost is 0.49 or 49% ($32,000 ÷ $65,000 x 100). 2. While SG&A typically doesn’t absorb as much revenue as cost of goods sold, it is still usually anywhere from 15 to 25 percent of revenue. Direct labor is typically a major part of these costs. Overall as of 2013, businesses seem to spend between 4-6% of their revenue on IT, and this range is recommended by CIO Magazine. This was a slight increase from the 2012 average, which was 4.7%. To have a fighting chance at profitability, few restaurants or cafes can afford lease costs exceeding 6 to 8 percent of total sales. NOI varied from $15,424 in San Diego to $5,433 in San Antonio. … As organizations grow larger, the relative cost of finance as a percentage of revenue should decline. Richmond saw the highest NOI growth, experiencing a 4.0 percentage point increase. Many of these costs are quasi-fixed in nature, meaning that as a company grows revenue, they gain leverage on these expenses and they decline as a percentage of revenue. Generally, the fancier the building, the higher the percentage operating expenses are of the GOI. For a bread-and-butter house, duplex or triplex building, 37.5 to 45 percent is probably a good estimate. Use them as a benchmark. Our IT Spending and Staffing Benchmarks study makes the job easier by providing an IT spending framework with hundreds of ratios, statistics, and other IT cost metrics for strategic IT budget analytics. Your operating expense percentage would be 450/1,200 = 37.5 percent. For example, if your business plan calls for $500,000 in sales your lease should ideally be $30,000 per year or $2500 per month. Unfortunately, the desire to keep overhead costs as low as possible has had pernicious effects on many nonprofits. After you have a grasp of the percentage that others in your industry are spending on IT operations, follow these steps each year to determine how you should spend your IT budget: 1. ... streamlining your customer service process and contributing to a reduction of operating costs throughout your business. The Better Business Bureau says that no more than 35% of a nonprofit’s budget should be spent on operating expenses. For 2013, it found that the average IT spending as a percentage of revenue is 5.2%. Prime Cost Percentage = Prime Cost ÷ Total Sales. Keep in mind the following percentages are rough and not exact. Since minimizing expenses in all areas should be a priority for the savvy business owner, consider looking at payroll costs as a percent of revenue, rather than a percent of expenses. See how much you should spend on logistics in this breakdown and analysis. What percentage of a business’s revenue should be rent? As well as actual dollar amounts spent, you can quickly calculate the percentage of sales. In fact, APQC’s data shows that for this measure, size matters. Preparing a benchmark for IT spending or IT employee staffing levels can be a difficult exercise for any business. To calculate this commercial price to rent ratio, we’ll look at two things: (1) your type of business and (2) your competitors. Business ’ s revenue should be spent on operating expenses you spending too on! 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