Where do I spend it all?
As you’ll see when you look at the MyCake benchmarking data for your own business we
show the results as a comparison to the turnover. We’ll do the same here.
What ratios does it make sense to look at?
• Turnover : Rent/Rates – For those users who pay rent, the percentage of
turnover spent on rent varies between 8% and 33% for Q3 2008 (Sept-Dec).
We’d suggest that anything much over about 10% is high. However part of the challenge here may be the minimum amount of space you can rent or the time you commit to rent it for … the shorter the notice period the higher the rent you’ll pay.
• Turnover : Travel/transport/subsistence – Expenditure on travel is certainly
an area which can get out of hand without noticing it. It’s particularly likely that
travel costs will go up when you’re pitching for work or researching new
clients. This could be a seasonal activity e.g. fashion designers attending
fashion week etc. So in this sense look at your travel costs across a year and
know the annual cycles.
In Q2 2008 the average spend on travel is 8% of turnover. The maximum was
almost 40% (that really is very high). As a ball park we’d say that 5% would
be more sustainable.
• Turnover : Marketing – Again marketing may be a seasonal activity in your
business so look at your marketing spend across all four quarters not just
one.
In Q2 2008 the average spend on marketing was 12% of turnover, the
maximum was 33% of turnover. This is a hard one to look at in the abstract in
that a ‘reasonable’ marketing spend very much depends on what your goals
are ie are you growing your business in which case your marketing spend will
generally be higher than short term sales levels might immediately justify as
you are investing in your business.
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