Cost of Doing Business Calculator
Enter your annual operating expenses across every cost category, then add your revenue and working schedule. The calculator shows your daily operating cost, cost per billable hour, cost per service call, CODB as a percentage of net sales, and a full expense breakdown with a donut chart. Adjust any number and all outputs update instantly.
Formula
Worked example
A landscaping company with $315,200 in annual costs runs 240 billable days: $315,200 / 240 = $1,313.33/day. With 6 billable hours per day: $315,200 / 1,440 = $218.89/hr. Running 5 jobs per day: $315,200 / 1,200 = $262.67/job. Revenue of $500,000 gives a CODB of 63.0% and net profit of $184,800.
What is cost of doing business (CODB)?
Cost of doing business (CODB) is the total of all operating expenses your business must pay regardless of how much revenue you generate. It includes wages, rent, insurance, vehicles, marketing, and every other line item needed to keep the doors open. Understanding CODB is the foundation of pricing: if you charge less per job or per hour than your CODB, you are losing money on every transaction no matter how busy you are. Expressed as a daily figure, CODB tells you the minimum revenue you must generate each working day to break even before any profit.
How to calculate CODB step by step
Start by gathering twelve months of financial statements or bank records and categorizing every expense. Group them into Labor (wages, payroll taxes, benefits), Occupancy (rent, utilities, property taxes), Vehicles, Insurance, Marketing, Administrative, and Other. Add all categories to get total annual cost. Divide by your billable days to get daily CODB. Divide by total billable hours to get your break-even hourly cost, which is the floor for setting your prices. Divide by total service calls or jobs to get cost per job. Finally, divide by annual revenue to express CODB as a percentage of sales, the metric most benchmarks use for industry comparisons.
Using CODB to set profitable prices
Your break-even hourly rate is your cost per billable hour. Any price below that means you lose money. A healthy business adds a profit margin on top: if your cost per billable hour is $90 and you target a 20% net margin, your minimum rate is $90 / (1 - 0.20) = $112.50 per hour. For service businesses with a fixed call fee, the cost per service call output tells you the absolute floor. Add your target margin to that number before setting a price. Review CODB at least quarterly because wages and fuel costs can shift it significantly mid-year.
Reducing your cost of doing business
Labor is typically the largest CODB category (40-60% of total costs for service businesses), so routing and scheduling efficiency directly reduce CODB per service call. Vehicles and fuel are the second most controllable category - route optimization software can cut fuel costs 10-20%. On the fixed-cost side, annual reviews of insurance premiums, subscription audits, and renegotiating commercial leases at renewal are the highest-leverage levers. The CODB percentage benchmark is most useful here: if your CODB is 85% of revenue but the industry average is 70%, you have a clear gap to investigate.
Typical CODB benchmarks by industry
| Industry | Typical CODB % | Notes |
|---|---|---|
| Retail | 70-85% | High COGS, thin margins standard |
| Restaurant / food service | 80-90% | Labor and food cost intensive |
| Professional services | 40-60% | Lower material costs, higher margins |
| Construction / trades | 65-80% | Variable materials and labor mix |
| Healthcare (private practice) | 60-75% | High insurance and staffing costs |
| Software / SaaS | 30-55% | Scalable; margins improve with revenue |
| Cleaning and janitorial | 55-70% | Labor-heavy, competitive market |
Cost of doing business as a percentage of revenue. Lower is generally better, but optimal ranges vary by business model.
Frequently asked questions
What is a good cost of doing business percentage?
A "good" CODB percentage depends heavily on your industry. Professional services firms (law, accounting, consulting) often achieve 40-60%. Retail and restaurants commonly run 75-90% because of high cost of goods sold and labor. Trades and service businesses typically target 65-75%. In general, any business sustaining a net profit margin above 10-15% is considered healthy, meaning CODB should stay below 85-90% at most.
How many billable days per year should I use?
Start with 52 weeks x 5 days = 260. Then subtract public holidays (typically 10-11 in the US), your vacation days, and any planned downtime for equipment maintenance or slow seasons. Most service businesses land between 220 and 250 billable days. Using too high a number makes your per-day cost look artificially low and causes underpricing.
Should I include owner salary in the CODB calculation?
Yes, if the owner performs work in the business, their compensation should be included as a labor cost at market rate for that role. Excluding it understates true CODB and makes the business appear more profitable than it is. If you sold the business tomorrow, a buyer would need to hire someone to do your job - that cost belongs in the calculation.
What is the difference between CODB and cost of goods sold (COGS)?
COGS covers the direct costs tied to producing or delivering each unit sold - materials, direct labor, and direct overhead. CODB is broader: it includes all operating expenses, both direct (COGS) and indirect (overhead like rent, insurance, and admin). For product businesses, CODB is essentially COGS plus operating overhead. Service businesses often use CODB to mean total overhead because they have little or no physical product cost.
How often should I recalculate my CODB?
At minimum, recalculate annually when planning next year pricing. Ideally, review it quarterly because input costs like fuel, wages, and insurance can shift materially mid-year. Any major change - a new vehicle, hiring an employee, or moving premises - is a trigger to recalculate immediately so your pricing stays current.
Can I use CODB to calculate a minimum hourly rate to charge clients?
Yes, and that is one of its most practical uses. Divide your total annual cost by your total billable hours per year (billable days x hours per day). The result is the minimum hourly rate to break even. Add your desired profit margin on top: minimum rate / (1 - target margin) gives you the rate to charge. For example, if your cost per hour is $75 and you want a 25% margin, charge at least $75 / 0.75 = $100 per hour.