The premises
Rent vs. revenue
Check whether the rent is reasonable for what you sell.
Try it in the calculatorWhat it is and why it matters
Rent is one of the heaviest fixed costs. As a rule of thumb, it shouldn't exceed 10% of net revenue, and around 5% is optimal.
It's worth projecting sales before signing, to know whether the rent of the space you like is within those limits.
The formula
- Rent share = rent ÷ net revenue × 100
- Revenue for 10% = rent × 100 ÷ 10
- Revenue for 5% = rent × 100 ÷ 5
What each value means
- Rent
- What you pay each month for the premises.
- Net revenue
- The month's sales excluding taxes.
Step by step
- Divide the rent by the net revenue and multiply by 100.
- Compare the result with 5% (optimal) and 10% (maximum).
Worked examples
The café's rent
With $60,000 of rent and $1,107,897.50 of net sales, rent is 5.42% of revenue: acceptable, just above the optimum.
For it to be 5%, net monthly sales would have to reach $1,200,000.
Study notes
Tip
If the space is bigger than you need, try to negotiate the rent in proportion to the meters you'll actually use.
Calculator
Try an example
Result
Fill in the data to see the result and the step-by-step working.