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what percentage of revenue should be spent on operating costs

Prime Cost Percentage = Prime Cost ÷ Total Sales. ... streamlining your customer service process and contributing to a reduction of operating costs throughout your business. Are you spending too much on logistics to keep up with rising fulfillment 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. 2. Generally, the fancier the building, the higher the percentage operating expenses are of the GOI. This means that 49% of your revenue is used to cover prime cost. Unfortunately, the desire to keep overhead costs as low as possible has had pernicious effects on many nonprofits. 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. To have a fighting chance at profitability, few restaurants or cafes can afford lease costs exceeding 6 to 8 percent of total sales. As organizations grow larger, the relative cost of finance as a percentage of revenue should decline. ... What percentage of sales should you spend on logistics? … Learning your unit cost can keep your small business profitable. 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. In fact, APQC’s data shows that for this measure, size matters. What Percentage of a Company's Revenues Should Go to Rent and Expenses?. Richmond saw the highest NOI growth, experiencing a 4.0 percentage point increase. Follow an IT roadmap that defines your broader IT strategy over the next few years. This was a slight increase from the 2012 average, which was 4.7%. Keep in mind the following percentages are rough and not exact. For example, if February sales are $65,000, then your prime cost is 0.49 or 49% ($32,000 ÷ $65,000 x 100). Your operating expense percentage would be 450/1,200 = 37.5 percent. NOI varied from $15,424 in San Diego to $5,433 in San Antonio. For 2013, it found that the average IT spending as a percentage of revenue is 5.2%. Direct labor is typically a major part of these costs. For a bread-and-butter house, duplex or triplex building, 37.5 to 45 percent is probably a good estimate. See how much you should spend on logistics in this breakdown and analysis. What percentage of a business’s revenue should be rent? The Better Business Bureau says that no more than 35% of a nonprofit’s budget should be spent on operating expenses. Preparing a benchmark for IT spending or IT employee staffing levels can be a difficult exercise for any business. 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. To calculate this commercial price to rent ratio, we’ll look at two things: (1) your type of business and (2) your competitors. 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. 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. As well as actual dollar amounts spent, you can quickly calculate the percentage of sales. 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. 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. Use them as a benchmark. That defines your broader IT strategy over the next few years the few! 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