Most small business owners I meet never look at key expenses as a % of turnover.
And yet getting this ratio right is the make or break of your business in many ways. Why? Because for example, if you run a kids play centre and your rent is just too high compared to what your revenue is, you simply won’t be able to get the profit you need to survive. Armed with this information you could strategically decide that moving premises will turn a break even or losing business, into a profitable one.
Key expenses depend on your industry, but are typically along the lines of rent, wages, cost-of-goods and marketing. Compare your numbers to the small business benchmarks located at the ATO site below:
Reviewing ALL of your expenses monthly in comparison to your turnover, will also help you see where expenses as a % of turnover are a little too high. Where to cut and how to forecast. This in turn will make you start mining your data even more, as you’ll enjoy being empowered around your numbers.
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