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December 19
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Understanding Business Ratios
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Small Business Ratios

Operating ratios, financial ratios, performance indicators, and benchmarks, are critical in developing a business plan, as they are one of the few tools, besides market research, that can be used to project expenses. Here are some samples for quick reference OR read our in-depth article: Understanding Business Ratios:

1. Business Services
2. Eating Places

Sources for Industry Operating Ratios

Listed below are some of the best online sources for ratios. If you have come across a valuable online research source, click here to add your link.

Online

U.S. Census Bureau - 1997 Economic Census of Business Expenses. The Economic Census profiles the US economy every 5 years, from the national to the local level. The 1997 Census is a little outdated, but a good place to start. More recent stats are also available at this site. 

Score Chapter 114 - Typical operating statements of selected businesses from accounting firms to second hand stores. Fast and easy. More than 40 sample industries.

Bizminer - Provides industry financial profiles for over 19,000 firms based on industry SIC codes. Average cost around $60-$70.

Ratio Calculator - Bankrate.com provides a ratio calculator for current ratio, quick ratio, debt to assets ratio, and many more.

RMA Annual Statement Studies - Robert Morris' Annual Statement Studies is derived directly from more than 150,000 statements of commercial bank borrowers and prospects. Financial statements come direct to RMA from their member institutions, who get their data straight from customers. RMA is also available in many libraries.

Library

The following texts are usually found in the library Reference Area:

Annual Statement Studies Collection of ratios detailing financial statement information from over 150,000 statements of commercial bank borrowers and prospects. Contains 5 years of historical data.
Dun and Bradstreet
Industry Norms and Key Business Ratios
Fourteen financial ratios plus common size/ percentage financial statements for over 800 SIC classifications. Based on over one million financial statements.
Troy's Almanac of Business and Industrial Financial Ratios Features IRS data on 4.7 million U.S. corporations. Ten years worth of historical data.
Financial Studies of the Small Business Ratios of 70 business categories for over 3,000 small private companies earning less than $1M.

Sample Ratios

Instructions: The following data can be used to help you determine whether your business proposal is viable and profitable. You can use the ratios to pinpoint areas where costs and expenses deviate from the industry average. The following costs are based on IRS surveys. Remember than the average percentages shown below should only be considered as guidelines. Geographical location can affect these percentages, as well as many other factors unique to your business.

1. Business Services

Business Services
Operating Ratios
(Source: IRS)

Revenues

100.0%

Cost of Goods Sold

 

-Purchases

12.7%

-Labor

4.4%

-Materials & Supplies

2.6%

-Other Costs

4.5%

Cost of Goods Sold

24.2%

Gross Profit

75.8%

Advertising

1.3%

Bad Debts

0.1%

Car & Truck Expense

4.7%

Commissions

1.8%

Depreciation

8.4%

Dues & Publications

0.3%

Employee Benefits

0.2%

Freight

0.2%

Insurance

1.6%

Interest

2.9%

Laundry & Cleaning

0.1%

Legal/Professional

1.2%

Office Supplies

0.9%

Postage

0.4%

Rent

3.0%

Repairs

1.9%

Salaries & Wages

8.5%

Supplies

1.2%

Taxes

2.1%

Telephone

1.7%

Travel/Entertainment

1.7%

Utilities

0.9%

Other

8.4%

Total Operating Expense

53.6%

NET INCOME

22.3%

2. Eating Places

Eating Places
Operating Ratios
(Source: IRS)

Revenues

100.0%

Cost of Goods Sold

 

-Purchases

44.8%

-Labor

3.6%

-Materials & Supplies

1.5%

-Other Costs

3.1%

Cost of Goods Sold

53.0%

Gross Profit

47.0%

Advertising

1.0%

Bad Debts

0.0%

Car & Truck Expense

0.8%

Commissions

0.1%

Depreciation

3.1%

Dues & Publications

0.0%

Employee Benefits

0.1%

Freight

0.0%

Insurance

1.5%

Interest

1.7%

Laundry & Cleaning

0.5%

Legal/Professional

0.5%

Office Supplies

0.1%

Postage

0.0%

Rent

3.8%

Repairs

1.4%

Salaries & Wages

15.1%

Supplies

1.3%

Taxes

3.9%

Telephone

0.3%

Travel/Entertainment

0.2%

Utilities

3.6%

Other

2.3%

Total Operating Expense

41.4%

NET INCOME

5.6%

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