If you want to calculate your ROS ratio manually, you’ll need to know the formula.
Posted: Thu Jan 02, 2025 10:39 am
Establish accurate profitability: Just because a company’s revenue is high doesn’t mean it’s profitable. Calculating your ROS gives stakeholders a more realistic overview to determine your business’s profitability.
Run a competitor analysis: While return on sales varies by industry, competitor ROS figures present an ideal benchmark for your business’s profitability compared to similar companies.
Improve your operation: Monitoring your ROS will help you identify strategies for improvement, such as reducing labor costs, minimizing materials expenses, increasing team efficiency, and improving sales revenue.
How to calculate your return on sales
a graphic of a lady holding a calculator with a webpage background and text overlay of how to calculate your return on sales
Calculating your return on sales is simpler than it may seem, but it will require good accounting software and a robust CRM system to capture the data you need.
With the right software and CRM integrations in place, you can create a custom report to determine your return on sales. After that, drawing a return on sales report can be as simple as clicking a button.
ROS Formula
There are actually two parts to the ROS formula. First, you’ll need to calculate your operating profit, which you’ll do using the following formula:
Step 1: Net Sales Revenue – Operating Expenses = Operating Profit
Once you have your operating profit figure, you can some tips for running a successful telemarketing business use the following ROS formula to determine your company’s return on sales:
Step 2: (Operating Profit ÷ Net Sales Revenue) x 100 = Return on Sales
Bear in mind that the operating expenses used in this formula should not include your company’s taxes and interest expenses.
Return on sales calculation example
Let’s walk through a return on sales calculation example to illustrate how this formula would work in a real-life situation.
If a business generated $750,000 in net sales revenue over the last quarter but also spent $600,000 in operating expenses over that period. The business’s ROS calculation would look like this:
Step 1: Sales Revenue – Operating Expenses = Operating Profit
$750,000 – $600,000 = $150,000
Step 2: (Operating Profit ÷ Sales Revenue) x 100 = Return on Sales
($150,000 ÷ $750,000) x100 = 20%
In this calculation, the resultant ROS is 20%, which would be considered relatively high in the real world, depending on the type of industry and company size. Generally speaking, a ratio of between 5% and 10% is considered a r
Run a competitor analysis: While return on sales varies by industry, competitor ROS figures present an ideal benchmark for your business’s profitability compared to similar companies.
Improve your operation: Monitoring your ROS will help you identify strategies for improvement, such as reducing labor costs, minimizing materials expenses, increasing team efficiency, and improving sales revenue.
How to calculate your return on sales
a graphic of a lady holding a calculator with a webpage background and text overlay of how to calculate your return on sales
Calculating your return on sales is simpler than it may seem, but it will require good accounting software and a robust CRM system to capture the data you need.
With the right software and CRM integrations in place, you can create a custom report to determine your return on sales. After that, drawing a return on sales report can be as simple as clicking a button.
ROS Formula
There are actually two parts to the ROS formula. First, you’ll need to calculate your operating profit, which you’ll do using the following formula:
Step 1: Net Sales Revenue – Operating Expenses = Operating Profit
Once you have your operating profit figure, you can some tips for running a successful telemarketing business use the following ROS formula to determine your company’s return on sales:
Step 2: (Operating Profit ÷ Net Sales Revenue) x 100 = Return on Sales
Bear in mind that the operating expenses used in this formula should not include your company’s taxes and interest expenses.
Return on sales calculation example
Let’s walk through a return on sales calculation example to illustrate how this formula would work in a real-life situation.
If a business generated $750,000 in net sales revenue over the last quarter but also spent $600,000 in operating expenses over that period. The business’s ROS calculation would look like this:
Step 1: Sales Revenue – Operating Expenses = Operating Profit
$750,000 – $600,000 = $150,000
Step 2: (Operating Profit ÷ Sales Revenue) x 100 = Return on Sales
($150,000 ÷ $750,000) x100 = 20%
In this calculation, the resultant ROS is 20%, which would be considered relatively high in the real world, depending on the type of industry and company size. Generally speaking, a ratio of between 5% and 10% is considered a r