What kind of profit margin can I expect in this business? I would like to hear real numbers from both one-man shows and companies with employees. For every $100,000 in gross sales, how much do YOU keep after all business expenses? I know there can be a lot of variables depending on your pricing, how much you pay for insurance, how much a gallon of gas costs in your area, etc., but let’s keep this relatively simple please.
When I was an Operations Manager for FISH, the expectation was that the owner should walk away with 33% of gross sales without ever cleaning a single window by himself. This is assuming he had a salesman, several window cleaners, an office, and royalties to the franchisor. Obviously if you’re a one-man show, you’re going to pocket a higher rate as you won’t have the overhead that a company with 10 trucks and 20 employees would have.
I’m not asking about dollar amounts, I’d like to hear your answers in terms of “percent of gross sales”. Thanks in advance!
I don’t think you can “expect” a certain percentage, a lot will be up to the actions you take. Pricing, how good you are running a lean organization and avoiding unnecessary expenses, etc.
Of course too, the size of the business will play into it. Using my company as an example, we have 6 full-time techs, office space, an office manager, as well as a small maid service start up that employes a full-time operations manager, a full-time maid and 2 part-time maids. We target and are usually pretty close to 20% profit, after my partner and I have paid ourselves.
I highly doubt there are many (if any) fish franchisees pulling 33% profit after paying themselves. I’d be shocked, actually.
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Yeah, 33% is a dream in franchise. Real world numbers for franchisees are closer to 20%. 25-29% if you run a REALLY tight ship and live in a business friendly area (no gross receipts, no sales tax, low tax rate, etc). The 10% you pay the franchise off the top equates to about a 25% hit on your end. Off the top means they get paid even if you’re carrying AR, they get paid before your employees, before you pay bills, before you can think about taking anything home. Or at least it did for me.
In a franchise, you can’t make good money until your production is over 500,000.
As far as nonfranchise, you can probably figure 30-40% goes to insurance, equipment, etc. If you pay commission to your employees, 30% is usually a good rate on payroll. That leaves 30-40% towards you but how you allocate that is determined by how you want to run the business.
A person chosen by God to tell the people of Israel what was going to happen.
I assume he asking “after you pay everything/everyone else off” what do you have left? That’s how I view profit. How I divey that up might be retained earnings (saving it in the business) or it might be what I take home.
In Larry’s case, he’s also included paying he and his partner.
I’m interested in this subject as well. Would you might sharing what you’re percentage breakdown is Michael?
There’s two kinds of profit: gross profit and net profit. Gross profit is after direct costs (gas, labor, chemicals, other costs of goods sold). This can be compared somewhat similarly amongst different companies.
Net profit is gross profit, minus expenses. (Rent/mortgage for office, payments on vehicles, insurance, office staff, marketing, etc, etc, etc.) There is a huge amount of variation among what people’s business expenses are, versus their gross profit, so it is not super useful to compare these numbers without having a lot more information.
The most important thing is to track your OWN profit carefully every month, and that way you can measure and compare it to your historical data.
Sure, but [MENTION=38401]BuffaloBillsFan[/MENTION] specifically asked for a breakdown per 100,000. He wanted to know what he might reasonably expect to take home. My feeling is that he has 30-40% to play with and out of that should come his salary and what’s left over could be defined as retained earnings or “profit.”
So given 100,000 gross what would be [MENTION=3418]michaelmole[/MENTION]'s theoretical breakdown? Assume a far distant point, american dollars, no friction, standard earth gravity, and atomic spin.
I’m just curious how everyone would break it down for their area. The OP wasn’t asking for specifics on your business, just general percentages.
^very true. and your numbers only count if you are paying yourself a fair market wage for what you do. so if you work 50 hours a week in field work, sales, marketing and admin and only pay yourself a $20k/year salary… your profit numbers are probably jacked up.
Are we talking $100k in a business that grosses $100k? $500k? $1.5m?
I’m not sure what you consider your job to be here, but I enjoy challenging assumptions, and encouraging people to consider the way they think about things.
“Your feeling” that he “should have” 30-40% to play with, is that including marketing expenses in the 60-70%? You say his salary should come out of that, so that means there would be actually a zero percent profit, or even a negative percent profit, if he paid himself a standard working wage out of $30-40k.
I just don’t think the question is specific enough for numbers to just get thrown around, willy-nilly.
If you want to talk specifically about gross profit margin, that’s fine.
That should be above 50%. Maybe close to or above 60%. Depends. How lean is your operation? How far do you drive to your jobs? You said you don’t want to get into pricing too much, but it’s literally the key to the whole thing. If you price a window at $9 instead of $12, you just cut a heck of a lot of profit % out. It matters.
But, just to make @JaredAI happy, if you do $100k in work, you pay out ROUGHLY 25-35% in field labor wages and 5-15% goes to gas, chemicals, and other cost of goods sold.
since the owner has so many variables he can control one way or other and pricing plays a HUGE role, I seems most of the time it ends up being a game of “I want/need to make $X, what’s it going to take to do that right NOW”
here’s an example of where the true net pretax profit line falls in relation to expenses
the owner paying himself a fair market wage is important as [MENTION=3418]michaelmole[/MENTION] said for true numbers that banks, buyers or other institutions will respect
Some budget to take out a desired net pretax profit % off the top first (like paying royalties to oneself I suppose) and make the rest of the budget work after that
and if one is in growth mode, as the book Seeing Beyond the numbers points out, one would want to be in the net pretax profit range of 15-20%
if you haven’t read it yet [MENTION=38401]BuffaloBillsFan[/MENTION] I highly recommend it, simple to read yet quite enlightening for anyone who doesn’t have a degree in business accounting
it would be nice to see the Fish budget for comparison
here is pie chart of an excel budget worksheet I made up based on the Seeing Beyond the numbers where all the budget variables for the big expense groups can be adjusted
Marketing would include all advertising 5% and wages 5%
operations includes all wages, payroll burden and work comp - trying to get this under 50% is seemingly impossible in California
admin includes business liab insurance, all supplies and admin wages
going by this type of budget, the owner can not be cleaning windows but is getting a portion of income from doing admin and marketing work and from their respective budgets and of course can take all the net pre tax income as personal wage for a huge boost too
I found in this type of budget the owner makes about 100k as a wage at the 1 mil mark, but at that point more middle mgmt is needed
of course it will depend on the leverage and type of jobs one is doing as well ie: storefront vs high leverage jobs where employee wages are considerably less than 30% of job yet still at market rates for the employee ($15/hr employee does $1k roofwash job in 2 hours ($30 wage))
what do you see [MENTION=38401]BuffaloBillsFan[/MENTION] ?
Revenues seems to usually end up at 70% gross pre tax personal wage and 30% business expenses
so 100k gross receipts ends up being a 70,000 gross personal pre tax 1040 income (which gets absolutely killed with self employment tax as a sole proprietor filing status)
( 2260 weekly goal @ $73 yearly PMH avg ends up being 1923 actual 52 week average after so cal weather, holidays, personal and vacation)
Bizminer national industry average reports on solo wc operations and over 1 mil wc operations when run thru the seeing beyond numbers filter are a mess, but an education to see nonetheless
I think the ones that really make progress are the ones that can float things if need be but always have that anchor of pulling the goal pre tax net profit budget amount first and just dedicating themselves to finding a way to make the rest of the budget work
My average net profit has been around 50-55%. Once I pay myself it’s more like 10%. It’s not really practical to say what you can expect because there are so many variables from one business to the next. I know I pay my employees way more than comparable jobs for my area, I spend a lot on line items (food, entertainment, bonuses) that most business owners probably wouldn’t, and much less on things they would; like advertising. Yes numbers are important, but more importantly can everyone go home at the end of the day and for the most part, be equally satisfied with what they are making and doing.
Yeah, this is exactly why I said the more important thing is to track your own numbers consistently, so you can know at a glance how you’re doing, when you make money, how much money, what works, what doesn’t work, etc.
