Business Expense Ratio Calculator
Where is your money actually going? This calculator breaks down your expense ratios — COGS, operating expenses, owner compensation — to show exactly where to optimize.
Business Expense Ratio Calculator
Analyze your profit margins and expense ratios for better financial management
Disclaimer: Gross margin = (Revenue - COGS) / Revenue. Operating margin = Operating Profit / Revenue. Net margin includes owner compensation as an expense. Expense ratio = Total Expenses / Revenue. Industry benchmarks vary — software typically has 70%+ gross margins while retail averages 25-35%. Compare against your industry for context.
Frequently Asked Questions
What is a good expense ratio for a small business?+
Target: COGS < 40% of revenue, Operating expenses < 30%, Owner compensation < 25%, Net profit > 10%. Service businesses: COGS < 25%, Operating < 35%, Net > 20%. Product businesses: COGS < 50%, Operating < 25%, Net > 10%.
How do I reduce my business expense ratio?+
Biggest levers: (1) Negotiate supplier costs (COGS). (2) Automate repetitive tasks (labor). (3) Eliminate underperforming subscriptions (operating). (4) Outsourcing vs. hiring fixed employees. (5) Review every expense quarterly — cut what doesn't directly generate revenue.
What expenses should be included in my ratio analysis?+
Include everything: COGS (materials, production, shipping), labor (salaries, benefits, payroll taxes), overhead (rent, utilities, insurance, software), marketing (ads, content, events), admin (accounting, legal, office), and owner compensation. Don't exclude your salary.
What is a good expense ratio for a small business?
Target: COGS < 40% of revenue, Operating expenses < 30%, Owner compensation < 25%, Net profit > 10%. Service businesses: COGS < 25%, Operating < 35%, Net > 20%. Product businesses: COGS < 50%, Operating < 25%, Net > 10%.