How To Calculate Recurring Margin in Deltek Costpoint | Arithmix
Learn how to calculate recurring margin in Deltek Costpoint with our step-by-step guide. Improve your financial analysis and decision-making skills with this essential tool.
Calculating recurring margin is an important aspect of any business that offers recurring services or products. It helps you understand the profitability of your recurring revenue streams and make informed decisions about pricing, marketing, and resource allocation. In this article, we will discuss what recurring margin is, when it is valuable to calculate it, and how to calculate it.
What Is Recurring Margin?
Recurring margin is the profit margin that a business earns from its recurring revenue streams. Recurring revenue streams are those that generate revenue on a regular basis, such as monthly subscriptions, service contracts, or maintenance agreements. Recurring margin is calculated by subtracting the direct costs associated with providing the recurring service or product from the revenue generated by that service or product.
For example, if a business generates $10,000 in monthly revenue from a subscription service and incurs $5,000 in direct costs (such as salaries, materials, and overhead), the recurring margin would be $5,000 or 50%.
When Is It Valuable To Calculate Recurring Margin?
Calculating recurring margin is valuable in several situations:
- When pricing recurring services or products: Understanding the recurring margin can help you set a price that is profitable and competitive.
- When evaluating the profitability of different revenue streams: Comparing the recurring margin of different revenue streams can help you identify which ones are the most profitable and worth investing in.
- When making decisions about resource allocation: Knowing the recurring margin can help you allocate resources to the most profitable revenue streams and optimize your operations.
How To Calculate Recurring Margin
To calculate recurring margin, follow these steps:
- Determine the revenue generated by the recurring service or product over a specific period (such as a month or a year).
- Determine the direct costs associated with providing the recurring service or product over the same period.
- Subtract the direct costs from the revenue to get the recurring margin.
- Express the recurring margin as a percentage by dividing it by the revenue and multiplying by 100.
For example, if a business generated $100,000 in annual revenue from a service contract and incurred $50,000 in direct costs, the recurring margin would be $50,000 or 50%. To express it as a percentage, divide $50,000 by $100,000 and multiply by 100 to get 50%.
Calculating recurring margin is a simple yet powerful tool for understanding the profitability of your recurring revenue streams. By knowing your recurring margin, you can make informed decisions about pricing, marketing, and resource allocation that can help you grow your business and increase your profits.
How Do You Calculate Recurring Margin in Deltek Costpoint
Deltek Costpoint itself isn’t naturally geared towards letting you calculate complex metrics like Recurring Margin. As an alternative, teams typically use products like Arithmix to import data from Deltek Costpoint and build out dashboards.
What is Arithmix?
Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers that’s powerful yet easy to use. With Arithmix you can import data from systems like Deltek Costpoint, combine it with data from other systems, and create calculations like Recurring Margin.
In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.
Arithmix is fully collaborative, giving your entire team access to your numbers and the ability to work together seamlessly.
Calculating Recurring Margin in Arithmix
Calculating metrics like Recurring Margin is simple in Arithmix. Once you've created your free account, you’ll be able to import your Deltek Costpoint data, and use it to create natural language formulas for metrics like Recurring Margin.
Arithmix is designed to give you the power to build any calculations you want on top of your Deltek Costpoint data, while also being easy to use and collaborate on. You can share your dashboards with users inside and outside of your organisation, making it easy to empower your whole team.Use Arithmix free