About

Miscalculating your cost of doing business leads to underpricing, cash flow crises, and eventual insolvency. The CODB ratio expresses total operating expenses as a percentage of gross revenue: a figure above 100% means every sale loses money. This calculator computes CODB%, break-even revenue, net profit margin, and per-unit cost allocation across fixed and variable expense categories. It assumes stable cost structures over the analysis period. Seasonal businesses should run separate calculations per quarter.

The tool distinguishes fixed costs (rent, insurance, salaries) from variable costs (materials, commissions, shipping) because their behavior at different revenue levels determines your break-even point. A common error is omitting owner compensation or depreciation from the expense sheet. This calculator includes dedicated line items for both. Results approximate real-world outcomes assuming linear cost behavior. Non-linear effects such as volume discounts or step-fixed costs require supplementary analysis.

Formulas

The core metric is the Cost of Doing Business ratio, expressing total operating expenses relative to gross revenue:

CODB% = Total ExpensesGross Revenue × 100

Break-even revenue is the minimum gross revenue required to cover all costs. It accounts for the variable cost ratio (VCR), which is total variable costs divided by revenue:

R_break-even = Fixed Costs1 − VCR

where VCR = Variable CostsGross Revenue

Net profit margin measures the percentage of revenue retained as profit after all expenses:

Profit Margin = R − C_totalR × 100

Per-unit cost of doing business allocates total expenses across units sold:

CODB_unit = C_totalUnits Sold

Where R = Gross Revenue, C_total = Total Expenses (Fixed + Variable), VCR = Variable Cost Ratio.

Reference Data

Expense Category	Type	Typical Range (% of Revenue)	Industry Benchmark	Notes
Rent / Lease	Fixed	5 - 15%	Retail: 8 - 12%	Includes CAM charges
Employee Wages	Fixed	20 - 35%	Service: 30 - 40%	Largest single cost for most businesses
Payroll Taxes & Benefits	Fixed	7 - 12%	US avg: 9.5% of wages	FICA, FUTA, workers comp, health insurance
Owner Compensation	Fixed	5 - 15%	Varies widely	Often omitted, leading to distorted CODB
Insurance (General)	Fixed	1 - 5%	Mfg: 2 - 4%	GL, property, professional liability
Utilities	Fixed	1 - 4%	Restaurant: 3 - 5%	Electric, gas, water, internet
Depreciation / Amortization	Fixed	2 - 8%	Capital-intensive: 6 - 10%	Non-cash but real economic cost
Marketing & Advertising	Variable	3 - 12%	E-commerce: 8 - 15%	SBA recommends 7 - 8%
Cost of Goods Sold (COGS)	Variable	25 - 60%	Retail: 40 - 60%	Raw materials, direct labor, manufacturing
Shipping & Logistics	Variable	2 - 10%	E-commerce: 5 - 12%	Scales with order volume
Sales Commissions	Variable	3 - 10%	SaaS: 8 - 12%	Percentage of revenue or gross profit
Professional Services	Fixed	1 - 4%	All industries	Legal, accounting, consulting fees
Software & Technology	Fixed	1 - 6%	Tech: 3 - 8%	SaaS subscriptions, hosting, licenses
Office Supplies & Misc	Variable	0.5 - 2%	All industries	Often underestimated cumulatively
Travel & Entertainment	Variable	1 - 4%	Consulting: 3 - 6%	Client meetings, conferences
Loan Interest / Debt Service	Fixed	1 - 8%	Leveraged: 5 - 10%	Principal payments are not an expense but cash flow
Taxes (Income / Franchise)	Fixed	2 - 10%	US Corp effective: 12 - 21%	Varies by entity type and jurisdiction
Maintenance & Repairs	Variable	1 - 4%	Mfg: 2 - 5%	Equipment, facility upkeep
Training & Development	Fixed	0.5 - 2%	Best practice: 1 - 3%	ATD avg: $1,252 per employee
Healthy Total CODB	Combined	60 - 85%	Target: < 80%	Above 90% signals high risk

Frequently Asked Questions

A CODB below 80% is generally healthy, leaving at least 20% net margin for profit, reinvestment, and contingency reserves. Service businesses often run 60 - 75%, while retail and manufacturing typically operate at 75 - 90% due to higher COGS. A CODB above 95% means the business is one bad month from losses.

Yes. Omitting owner compensation is the most common CODB error. If the owner works 50 hours per week but draws no salary, the business appears profitable but would fail the moment a replacement manager is hired. Include a market-rate salary for every working owner to get an accurate CODB figure.

If VCR ≥ 1.0, the denominator becomes zero or negative, meaning every additional unit of revenue costs more than it earns. Break-even is mathematically impossible in this state. The calculator will flag this condition. The business must reduce variable costs per unit before break-even analysis becomes meaningful.

COGS (Cost of Goods Sold) includes only direct production costs: raw materials, direct labor, and manufacturing overhead. CODB encompasses COGS plus all operating expenses: rent, utilities, marketing, administrative salaries, insurance, and depreciation. CODB is always larger than or equal to COGS. A business with low COGS but high overhead can still have an unsustainable CODB.

Depreciation represents the economic consumption of assets. While it does not reduce cash today, it reflects real value erosion. Excluding depreciation inflates apparent profitability and delays recognition that equipment replacement will require capital. The IRS and GAAP both require depreciation in expense calculations. Include it in CODB for accurate long-term planning.

Yes. Enter all values for the same time period - all monthly or all annual. Mixing periods (e.g., monthly rent with annual revenue) produces incorrect results. The calculator does not convert between periods. For seasonal businesses, quarterly analysis often reveals cost patterns that annual averaging hides.

Per-unit CODB reveals your minimum viable price. If your per-unit cost is $47.20 and you sell at $49.99, your margin is only 5.6% per unit - invisible in aggregate reporting until a volume drop makes it catastrophic. It also enables comparison against competitor pricing and informs quantity discount limits.