A founder who scaled eight companies to $20 million-plus walks through allocating revenue across expense buckets so profit stays protected. He gives a baseline split: people 25%, COGS 15%, marketing 10%, facilities 8%, technology 5%, fees 10%, commissions 5%, miscellaneous 2%, profit 20%. The key rule: expenses plus profit must total 100% or you'll eat into your target.
I've scaled 8 companies to $20 million and beyond, and I see business owners go from barely making minimum wage to making more than a half a million dollars a year after implementing just one tool they can build in less than one hour. This is part 4 of how to double your take-home profit using one simple Google Sheet, and we're on to step 3, which is to establish your expense ratios. So you've decided your profit, you've decided how much you're going to take out of the business, you've built your expense buckets. Now we need to figure out how much we're going to allow to flow into each one of these buckets. If you set your profit at 20%, then every other expense bucket has to fit inside the remaining 80%. So how do you go about allocating the remaining 80%? This is what's known as your expense ratios. And here's a good baseline example. And by the way, we also made a template with all of these buckets. So if you want that, just comment "for profit" and I'll send it to you. Now in ours, for our example, and for this particular company, we got people at 25%. That's 25% of total revenue. Cost of goods sold, that's 15%. Marketing, 10%. Facilities, 8%. Technology and tools, 5%. Fees and admin, 10%. Commissions are 5%. If you add those up, that's 78%. Tack on 2% for miscellaneous, and good news, expenses total 80%. If you add in the 20% that we pre-planned for profit, every dollar coming into the business officially has a home, including the dollars that we intend to flow directly into your pocket. Now, quick disclaimer, your exact ratios are almost certainly going to differ. And so if you're not sure what they should be, you can Google it. If you're not sure about Google, you can ask Claude or ChatGPT. Just make sure that your total planned expense ratios plus what you've allocated for profit margin total up to 100%. Don't eat up all of the profit in expenses. Now that we have all the raw materials you need for your expense analyzer Google Sheet, we'll build it and we're going to find some hidden profit in part 5.
