“Can I afford this?” Finally, a black-and-white answer
Ever wonder if you’re wildly overpaying for rent or payroll? That’s where expense ratios come in.
Maybe it’s the die-hard-CPA-nerd in me, but one thing I love love love analyzing for clients is their expense ratios.
[Btw - an expense ratio is just a fancy way of saying: “For every $1 of revenue my business brings in, how many cents go out the door for a certain expense category?]
Why do expense ratios matter?
Because this is literally the stuff that keeps business owners broke - aka only pulling $4k/mo out of their business when it’s doing close to 7-figures in revenue.
And I don’t care if you’re planning to sell your business, bring on another partner or just considering whether to hire another admin person - you need to know what the benchmarks are for spending in your industry.
That way - when some Grade A office space comes around and rent is $13,000/mo - you know whether it makes sense or not given your current revenue level.
I.e. Let’s say you run a law firm. Industry benchmark data tells us that your rent expense should make up about 4.8% of your revenue. This means, if you have revenue of $800k/year, rent expense should be $3,200/month.. Aka you should most likely say “NO” to the $13k/month office rent option lest you spend 19.5% of your revenue on rent each and every month.
That’s the decision making power of an expense ratio. You get a black-and-white answer to your “can (or should) I afford this??” question.
The cost of ignoring expense ratios
Now, we all know decision making in your business is rarely that simple. And you might be the partner at a law firm reading this, saying - “Sh*t - we just locked into a triple net lease for the next 5 years and my rent expense is 16% of firm revenue…. What do we do now??”.
As in, you didn’t know that you were overpaying for rent relative to your revenue until you were today years old.
Friend - that’s okay - because that’s literally why I have a job.
In my experience, many businesses doing $500k+ in revenue still have 2 - 3 main expenses that are eating up their margins and making it impossible for the owner to consistently pay themselves $10k - 15k/month - which should be the baseline at this level.
How we fix it
I love to help my clients figure out where they are overspending so that they can start prioritizing paying themselves at least $15k/month instead of sinking another $8k into social media support after they’ve already spent $45k on sponsorships, Google Ads, and other social media support in 2025.
Because there’s a def a time to invest in your business, for sure.
But there’s also a time to get you paid.
And here’s the thing: if you don’t know your expense ratios, you’re flying blind.
That’s when you end up stuck with the $13k/month lease you can’t afford, payroll creeps past 50% of revenue because you’ve added support staff willy nilly, and now you're cash-poor every month
That’s where we come in.
We don’t just hand you a report and say, “good luck.”
My team and I roll up our sleeves, work in the background with your team, and help execute the changes that actually move the needle on improving your business' profitability. For established businesses (often $500k-$5M in revenue), that means anything from restructuring your expense strategy to fixing internal workflows.
So, if your business is in that revenue range and you’re still not consistently paying yourself at least $15k/month, let’s fix that.
Book a call with me this week. We’ll dig into your expense ratios, compare them against industry benchmarks, and then build + implement a plan to stop the profitability leaks and increases your take-home pay - stat.
The urgency?
The longer you wait, the more cash that leaks out of your business where it just doesn’t need to - and the harder it is to get back on track when you’re paying 24.99% on borrowed money from Monsieur Visa.
Talk soon,
Tanya
P.S. Want a head start? I put together a free Expense Ratios Guide with the exact industry benchmarks I use when I’m analyzing client numbers. Grab it here:
https://drive.google.com/file/d/1tvbEAVeqilVxXIlZUAeeGh3ZZnu2HXHy/view?usp=sharing
And if you’re looking at that guide thinking, “oh crap, my ratios are way off”.. well, that’s when you book the call lol..