Profitability Analysis

Over the course of a year, we asked SoftwareCEO members to tell us about their company and how they budgeted their dollars. Seventy-five responded and the Operating Ratios and Analysis Book was born.

Now we've taken this same information and cross-cut it to see how a company's profitability affects their spending.

We defined profitability as being relative to revenue and calculated profitability by taking the Net Pre-Tax Profit, and dividing it by the current year’s Total Annual Revenue. 

We then identified which of the respondents fit into each quartile (the higher the calculated profitability ratio, the more profitable).  With 75 respondents in total each quartile, except the 3rd quartile, had 19 respondents.  The 3rd quartile had 18 respondents.  The profitability analysis then compares the operating ratios and demographic information for the most profitable and least profitable companies. The results, and this analysis, reflect how software companies, that is, the SoftwareCEO audience, operate.   With that being said, I must stress that the results and analysis are not recommendations on how any specific software company can, or should, operate.

The results and analysis are not recommendations on how any specific software company can, or should, operate.

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