The IBISWorld "Wages" Trap (ribbon at the top): Where Your Acquisition Profit is Hiding

When you pull an IBISWorld Industry Report, you likely head straight to the "Cost of Operation" chart. You see "Wages" as a percentage of revenue—perhaps it's 15% in Manufacturing or 50% in Professional Services. But here is what most searches miss: IBISWorld’s definition of "Wages" isn't just take-home pay. It includes "On-costs and benefits," with health insurance being the single most volatile and unmanaged component. The Math of the Turnaround: The Load: In the mid-market, "Benefits" typically add a 30% to 42% load on top of base salaries. The Inefficiency: Dave Chase’s research proves that 20–40% of that "load" is pure waste (PBM spreads, broker commissions, and clinical "leakage"). The Lever: If you acquire a company where Wages/Revenue is high, you aren't stuck with that number. Cutting the benefit load in half doesn't require a single layoff or salary cut—it just requires fixing the healthcare supply chain. The Impact on your Multiple: If a $20M revenue company has a 30% Wage cost ($6M) and you reduce the "Benefit Load" from 40% to 20% through a transparent model, you just added $1.2M directly to EBITDA. At a 7x multiple, you just increased the company's enterprise value by $8.4M on Day 1, simply by managing a line item the previous CEO ignored as a "fixed cost." Next time you look at an IBISWorld report, don't just see a labor cost. See a healthcare supply chain waiting to be optimized. #CEO #MA #IBISWorld #PrivateEquity #EBITDA #HealthRosetta #ValueCreation