What is a healthy CODB ratio?

It depends on industry. Retail typically runs 90-95% CODB. Software businesses may run 50-70%. A ratio consistently above 100% means the business loses money on operations. Most small businesses target below 85%.

How is CODB ratio different from the operating expense ratio?

CODB typically includes all expenses (COGS plus operating expenses) as a percentage of gross revenue. The operating expense ratio often excludes COGS. Be consistent about what costs you include when comparing ratios across periods or peers.

Can I use CODB to set pricing?

Yes. If your CODB ratio is 80%, you know 80 cents of every revenue dollar covers costs. Prices must be set high enough so that, after all costs, you retain the desired profit margin.

Cost of Doing Business Calculator

Calculate your cost of doing business (CODB) ratio to understand what percentage of revenue is consumed by operating expenses.

By AbraCalc Editorial Team · Reviewed by AbraCalc Methodology Review · Last reviewed: 2026-06-25

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How to use this tool

Enter total operating expenses and gross revenue in the fields above.
Results update instantly as you type — or click Calculate.
Read your cost of doing business ratio and the full breakdown beneath it.

⚠ This tool provides general estimates for education only and is not financial, tax or legal advice. Figures may not reflect your situation — verify with a qualified professional.

Formula

CODB Ratio = (Total Expenses / Gross Revenue) × 100

Net Profit = Gross Revenue − Total Expenses

Profit Margin = (Net Profit / Gross Revenue) × 100

How it works

The cost of doing business (CODB) ratio expresses total operating expenses as a percentage of gross revenue, revealing how much of every dollar earned is consumed by costs. A lower CODB ratio indicates greater operational efficiency and higher profitability potential.

This calculator assumes all listed expenses are operating costs and that gross revenue represents total sales before any deductions. It does not account for taxes, depreciation schedules, or capital expenditures separately.

Worked example

Retail Business with $100,000 Revenue

Total operating expenses = $80,000; Gross revenue = $100,000.
CODB Ratio = ($80,000 / $100,000) × 100 = 80%.
Net Profit = $100,000 − $80,000 = $20,000.
Profit Margin = ($20,000 / $100,000) × 100 = 20%.

The business spends 80 cents for every dollar earned, yielding a 20% profit margin ($20,000 net profit).

Common mistakes to avoid

Leaving out owner salary or draw when the owner works in the business, understating the true CODB ratio and inflating apparent net profit.
Mixing capital expenditures with operating expenses, distorting the CODB ratio in periods with large equipment or real estate purchases.
Comparing CODB ratios across industries without adjusting for norms -- a 90% ratio is unsustainable in retail but normal in high-labor professional services.

Key terms

Cost of Doing Business (CODB): The total operating expenses a business incurs to generate its revenue, expressed as a ratio or percentage of gross revenue.
Gross Revenue: Total sales income before any expenses, returns, or deductions are subtracted.
Operating Expenses: Costs required to run the day-to-day business operations, such as rent, salaries, utilities, and supplies.
Profit Margin: Net profit expressed as a percentage of revenue, indicating how much of each revenue dollar becomes profit.

Frequently asked questions

What is a healthy CODB ratio?: It depends on industry. Retail typically runs 90-95% CODB. Software businesses may run 50-70%. A ratio consistently above 100% means the business loses money on operations. Most small businesses target below 85%.
How is CODB ratio different from the operating expense ratio?: CODB typically includes all expenses (COGS plus operating expenses) as a percentage of gross revenue. The operating expense ratio often excludes COGS. Be consistent about what costs you include when comparing ratios across periods or peers.
Can I use CODB to set pricing?: Yes. If your CODB ratio is 80%, you know 80 cents of every revenue dollar covers costs. Prices must be set high enough so that, after all costs, you retain the desired profit margin.