Overhead percentages: What is optimum?
I was asked again about percentages of expenses. The inquiry came as a result of a recent survey that was being reviewed. What is the appropriate expense percentage of revenue for health, etc. was the question in this instance.
This was my response:
I don’t worry about surveys or what percentages others manage. Every business/law firm is different … and there are too many variables to look at others’ operations and then get depressed because you didn’t meet them or elated because you bettered them … each feeling may not be justified. Do the best you can under your particular circumstances.
When I coach and consult with lawyers, that is one of the areas of my inquiry … how we can do what we do better. If your profit is 20%, for example, who’s to say that it couldn’t be 25%? And if another firm manages 30%, does that make your percentage a poor performance? Not necessarily. Remember that percentages of this nature are based off the beginning figure of revenue. How is your revenue? If you can get it higher, then your expense percentages will be lower/better.
There are too many variables to give a definitive answer. Thus, I distrust the surveys that are floating around.Tags: Cash Flow - Finances, Management