A good location for your business may attract more customers and boost your sales, but it also typically comes with higher rent costs that affect your profits. Calculating the individual occupancy to sales ratio gives you an idea of the type of property you can afford.
Make a list of all costs arising from your business occupying a property or space in a mall. Occupancy costs don't only include the rent, but also maintenance of the common area, utilities, taxes and any other liability paid to the landlord.
Add all the items of the list to calculate the occupancy cost. This occupancy cost value must correspond to a certain period of time, such as a week, month or year.
Calculate the value of your total sales within the period of time you are examining. Be careful not to confuse sales with income or profit. "Sales" refers to the amount of money you receive when you sell a product; "income" can come from various sources, such as members' club fees; and "profit" equals income minus costs.
Divide the figure of occupancy cost by the value of your sales. Multiply the quotient by 100 to convert it to its percentage value. For example, if your occupancy costs are $1,500 a month and your sales are valued at $15,000, then the ratio is (1,500/15,000) × 100 = 10 percent.
If you calculate occupancy costs by the square foot, such as $30 per sq. ft., divide the value of total sales by the square feet of your property or space, before calculating the occupancy cost to sales ratio.
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