05C. Profitability KPIs: Expense Margin

Episode 5 of Building Your Multi-Million Dollar Practice focuses on digging into KPIs that measure Profitability and how they impact your clients and your advisory services. We already went over a few of these, so now we’re going to focus on Revenue Per Employee, Cost of Goods Margin, Expense Margin, Net Worth, and Gross Margin. An Expense Margin is when you take all the expenses of the business and compare it to the business’ revenue. What is important to understand about this KPI is that a business with a higher expense margin is not doing as well as one with a lower expense margin. This metric becomes very valuable when you are able to compare it to similar businesses in the same sector. By benchmarking against others you can help them improve performance, grow profitability, and increase revenue.  The Formula: -1 * (Expenditure / Income)