OpEx Ratio: 35% of Revenue Spent on Overhead (Should Be 25%) = Losing Profit
Retail chain SGD 10M revenue: operating costs SGD 3.5M (35% ratio = too high). Breakdown: rent SGD 1.5M (15%), labor SGD 1.5M (15%), utilities+supplies SGD 300K (3%), admin SGD 200K (2%). Target OpEx 25% = SGD 2.5M allowed. Excess: SGD 1M/year opportunity. Action: (1) renegotiate rent (SGD 1.5M → SGD 1.2M = -SGD 300K), (2) improve labor efficiency (same output, 10% fewer staff = -SGD 150K), (3) reduce waste (SGD 300K → SGD 250K = -SGD 50K). Total savings: SGD 500K/year (5% of revenue recovered as profit).
Calculating OpEx Ratio#
OpEx Ratio = (Rent + Labor + Utilities + Admin + Insurance) ÷ Revenue. Example: revenue SGD 10M, rent SGD 1.5M, labor SGD 1.5M, utilities SGD 300K, admin SGD 200K, insurance SGD 100K. Total OpEx = SGD 3.6M. Ratio = SGD 3.6M ÷ SGD 10M = 36% (high, target 25-30%).
Industry Benchmarks#
Retail: 25-30% OpEx ratio. Restaurants: 30-35% (high labor). Manufacturing: 20-25% (more automation). Services: 40-50% (labor-heavy). SaaS: 30-40% (varies by stage). Compare to your industry, not just absolute.
(1) Rent: negotiate renewal, relocate to cheaper location, share space.
Reducing OpEx#
(1) Rent: negotiate renewal, relocate to cheaper location, share space. (2) Labor: automation, outsourcing, improved scheduling (fewer hours). (3) Utilities: LED lights, efficiency upgrades, demand control. (4) Admin: reduce headcount, outsource functions (accounting, HR), consolidate tools.
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AskBiz OpEx Monitoring#
Tracks OpEx as % of revenue monthly. "September: SGD 10M revenue, SGD 3.6M OpEx (36% ratio, 1% above target). Breakdown: rent SGD 1.5M (on-plan), labor SGD 1.5M (100 basis points above budgeted 14%), utilities SGD 300K (on-plan). Variance cause: labor (higher overtime due to sick leave). Recommendation: hire 2 temps to reduce overtime (+SGD 40K cost vs SGD 150K overtime savings = net SGD 110K savings)."
- Retail chain SGD 10M revenue: operating costs SGD 3.5M (35% ratio = too high).
- Breakdown: rent SGD 1.5M (15%), labor SGD 1.5M (15%), utilities+supplies SGD 300K (3%), admin SGD 200K (2%).
- Target OpEx 25% = SGD 2.5M allowed.
People also ask
Should OpEx be the same % every month?
Some variation is normal (seasonal staffing, one-time costs). Target +/- 2% variance. Anything >2% above plan = investigate and correct.
What's a quick win to reduce OpEx?
Labor scheduling: right-size shifts to match demand (peak hours: full staff, slow hours: skeleton crew). 5-10% labor cost reduction possible without headcount reduction.
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Monitor OpEx Ratio (Keep Overhead Under Control)
AskBiz tracks operating expenses as % of revenue. Flags variances. Recommends cost reductions. Targets <30% OpEx ratio. Try free.
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