Financial Profiles and Ratios

Chapter 9:The Business You're In - Page 9.9

Financial Profiles and Ratios

There's no substitute for composite industry data showing standard financials for your type of business. For example, Business Plan Pro®, includes thousands of industry data reports showing average sales growth over five years, average profitability, and balance sheet numbers for different types of businesses classified according to the Standard Industrial Classification (SIC) listings and the North American Industry Classification System (NAICS). The data is tied into the ratios table of the product, so users can automatically compare their own numbers to standard industry profiles.

This information can be very valuable. It tells me, for example, that shoe retailers selling less than $1 million per year make an average of 42 percent gross margin, they spend an average of 40 percent on operating expenses, and they net about one percent of sales as profits. The source of this data, Integra Information Systems, maintains its website at www.integrainfo.com where it sells additional data reports including standard industry profiles, in-depth industry profiles, valuation reports, and others.

The Risk Management Association (formerly the Robert Morris Associates) is a membership organization sponsored by banks which publishes an annual listing of standard financial ratios, developed by polling member banks, for actual business results of thousands of different companies in the small business arena.

Two of RMA's publications, called Annual Statement Studies and Financial Ratios Benchmarks, are other very valuable sources of information. Like Integra's data, it lists standard financial profiles according to SIC and NAICS codes. This information is available in print, on CD-ROM, or online and at this writing sells for less than $129 to members or $400 to nonmembers. Separate industry profiles are also available online. You can find out more by calling (215) 446-4000, or visiting their website at www.rmahq.com.

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