Growth Strategies

Need help on determining what the proper cost of sales percentage should be for my firm.

Guest Writer
Entrepreneur, Business Planner and Angel Investor
min read
Opinions expressed by Entrepreneur contributors are their own.
I don't blame you. Everybody wants and needs some sort of standards and guidelines for his or her industry. For packaged software, my industry, I can buy some ratios from a newsletter provider that does an annual survey. I've bought them off and on for years, and some parts of that are useful.

I assume there are similar information providers for IT services. You'd be more likely to know them than I would. Maybe searching for newsletters and industry associations might lead you to where you want to go.  I believe Forrester Research has an IT industry section; it might have your number.

You can get some standard industry ratios in several places. We bundle them with Business Plan Pro. We also get them from Oxxford Info. We used to get them from Integra Information Systems. The Risk Management Association has some of this information, too.

Our legal situation doesn't encourage talking to competitors, but if you can find some similar businesses that don't compete directly, that might help.

By the way, you have your terminology wrong, which will complicate your research. Sales and marketing expenses are different from cost of sales, and referring to them that way, particularly with the COS acronym, will send people off in the wrong direction.

It's not your fault: The usage by accountants and financial analysts is confusing. But cost of sales is direct cost, and sales and marketing expenses are part of running expenses.


More from Entrepreneur

One-on-one online sessions with our experts can help you start a business, grow your business, build your brand, fundraise and more.
Book Your Session

Whether you are launching or growing a business, we have all the business tools you need to take your business to the next level, in one place.
Enroll Now

Are paying too much for business insurance? Do you have critical gaps in your coverage? Trust Entrepreneur to help you find out.
Get Your Quote Now

Latest on Entrepreneur

My Queue

There are no Videos in your queue.

Click on the Add to next to any video to save to your queue.

There are no Articles in your queue.

Click on the Add to next to any article to save to your queue.

There are no Podcasts in your queue.

Click on the Add to next to any podcast episode to save to your queue.

You're not following any authors.

Click the Follow button on any author page to keep up with the latest content from your favorite authors.