How To Calculate Recurring Margin in Sage Contractor | Arithmix

Calculating recurring margin is an important aspect of managing your business finances. It helps you determine the profitability of your recurring revenue streams and identify areas where you can improve your margins. Recurring margin is the difference between the recurring revenue generated by your business and the recurring costs associated with delivering that revenue. 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 a financial metric that measures the profitability of your recurring revenue streams. It is calculated by subtracting the recurring costs associated with delivering your products or services from the recurring revenue generated by those products or services. Recurring revenue is revenue that is generated on a regular basis, such as monthly or annually, and is predictable in nature. Recurring costs are the costs associated with delivering that revenue, such as salaries, rent, and other overhead expenses.

Recurring margin is an important metric because it helps you understand the profitability of your recurring revenue streams. It allows you to identify areas where you can improve your margins and increase your profitability. By tracking your recurring margin over time, you can see how changes in your business operations affect your profitability.

When Is It Valuable To Calculate Recurring Margin?

Calculating recurring margin is valuable in a number of situations. If you have a business that generates recurring revenue, such as a subscription-based service or a maintenance contract, it is important to calculate your recurring margin to understand the profitability of those revenue streams. Recurring margin can also be valuable if you are considering expanding your business into new recurring revenue streams. By calculating the recurring margin of potential revenue streams, you can determine whether they are likely to be profitable.

Recurring margin can also be valuable if you are looking to improve the profitability of your business. By identifying areas where you can improve your margins, you can take steps to increase your profitability. For example, if your recurring margin is low, you may need to increase your prices or reduce your costs to improve your profitability.

How to Calculate Recurring Margin

To calculate recurring margin, you will need to determine your recurring revenue and your recurring costs. Recurring revenue is the revenue generated by your recurring revenue streams, such as subscriptions or maintenance contracts. Recurring costs are the costs associated with delivering that revenue, such as salaries, rent, and other overhead expenses.

Once you have determined your recurring revenue and your recurring costs, you can calculate your recurring margin by subtracting your recurring costs from your recurring revenue and dividing the result by your recurring revenue. The formula for calculating recurring margin is:

Recurring Margin = (Recurring Revenue - Recurring Costs) / Recurring Revenue

For example, if your recurring revenue is $10,000 per month and your recurring costs are $5,000 per month, your recurring margin would be:

Recurring Margin = ($10,000 - $5,000) / $10,000 = 0.5 or 50%

In this example, your recurring margin is 50%, which means that for every dollar of recurring revenue generated, you are keeping 50 cents as profit after accounting for the costs associated with delivering that revenue.

Calculating recurring margin is an important aspect of managing your business finances. By understanding your recurring margin, you can identify areas where you can improve your margins and increase your profitability. Use the formula above to calculate your recurring margin and track it over time to see how changes in your business operations affect your profitability.

How Do You Calculate Recurring Margin in Sage Contractor

Sage Contractor 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 Sage Contractor 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 Sage Contractor, 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 Sage Contractor 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 Sage Contractor 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.