The ratio of revenue that you spend on rent, marketing, and payroll for your company can tell you a lot about the health of your business. If you import actuals from your accounting solution into the Dashboard, you'll be able to access these metrics:
Revenue spent on rent
This metric helps you figure out how much of your company’s revenue to spend on rent for a workspace. Aiming for a lower percentage here may make it easier for your business to absorb fluctuating costs in other areas, such as inventory and personnel.
But a low percentage doesn’t always mean you’re paying lower rent. A more expensive property can still have a low rent-to-revenue ratio, if its location brings more revenue to the business. For example, a storefront in a more expensive location may bring in more customer traffic and revenue.
Keep in mind that the percentage of revenue companies spend on rent varies a great deal by industry and region. So, for this benchmark, it’s best to compare your company to those in the same industry and region. A good place to do that is in the Benchmarks tab of LivePlan.
Revenue spent on marketing
This metric helps you estimate how much of your company’s revenue to spend on advertising, promotions, and other marketing activities to generate sales. The ideal amount to spend on marketing depends on several factors. If you can spend less on marketing and still generate the same revenue, then that’s typically the most efficient and profitable thing to do.
However, if you spend less on marketing than your competition does, you run the risk of potential customers not knowing who you are.
Also, revenue spent on marketing tends to be higher for smaller businesses and startups. More established and larger businesses tend to spend less revenue on marketing. This makes sense because startups often need to spend more on marketing to survive and grow compared to larger, more established companies.
Revenue spent on payroll
This metric helps you estimate how much of your company’s gross income to spend on payroll. For this metric, payroll includes salaries and wages for on-staff and contract employees, plus employee-related expenses (benefits, taxes, etc.).
Spending too much of your revenue on personnel can result in your business being unprofitable. On the other hand, spending too little can make it difficult to attract and keep good employees.
This metric can also tell you something about a company’s efficiency. If two similar companies generate the same revenue, but one does it with 30% fewer people, the more efficient company will clearly be more profitable.
Keep in mind that this percentage may vary quite a bit by industry. So, for this benchmark, it’s best to compare your company to those in the same industry, as in the Benchmark tab.