What are YOUR profit margins?

Marketing
1

what percentage of your total business income, do you have left for YOURSELF, after all the business deductions are taken. if this seems too personal a question, im sorry, im just trying to get an idea for what i should be aiming for as my business grows.

it would be ideal if you give a ballpark figure of how much your business makes before deductions and after, and the percentage of what YOU keep.

im mostly interested in hearing from the guys on here that have at least 1 full-time employee and are making over 100,000 or so a year.

im also interested in general advice on how to keep overhead low, and where you’d say NOT to cut corners.

2

Kyle, this profit-stuff is for sure something I would keep confidential, as no doubt everyone else will, too.

It really is completely subjective, and won’t help you much to hear the answer to this.

As far as “what to keep and what not to keep as expenses…”, cut as many things as possible that are [I]NOT revenue-GENERATING[/I] activities/investments.

What generates revenue within your business? You must constantly record the effect of various tweaks and adjustments, and see what impact their addition or omission makes.

Example:

Spending $50 on a proposal package for 5 different clients costs you $250 and lands you one $10,000/yr client.

Spending $5 on a “dumbed-down” proposal package for 15 other prospective clients nets you ZERO new clients.

Conclusion: Spend the $$ on the fancy proposals.

Approach everything this way from now on. If it doesn’t make you money, either change the way you do it, or get rid of it. If it does make you money, see if you can make it earn MORE money for your business.

3

This post really peaked my interest, so I called up my accountant. After he did some research he said the average profit margin of “corporations in the united states” was [B]8.6% [/B]

Disclaimer:

He couldn’t tell me what year this was from

He couldn’t pinpoint service business’s

And he could not discriminate between one man shows and larger business’s.

4

And corporate profit margins include monies left over after the big-wigs take their mighty cut, too.

5

When we’re factoring our profit margin, would we start after our paychecks are taken out?

6

If your business isn’t incorporated, all of the profits left over after your expenses are your personal income.

If you’re incorporated, the company’s profit is determined after everyone - including you - gets paid.

Example:

[INDENT][B]One-man show:[/B]
$65,000 revenue
$10,000 expenses
[I]$55,000 personal income[/I]

[B]Incorporated one-man show[/B]
$65,000 revenue
$10,000 expenses
[I]$55,000 personal income
$0 corporate income[/I][/INDENT]

Of course, this is what accountants are for: properly dividing the corporate tax and personal tax burdens, to reduce the overall amount owed.

7

[B]Not that its too personal,its just awful hard trying to determine what you profit would be without considering the rest of the equation.

Just because a business does 6 figures doesn’t mean squat!I’ve shared this before…the 33/33/33 rule 33% for overhead 33% to cover labor & the remaining 33% profit although much easier said then done its a good way to gage things.

[/B]

8

i guess my new question would be then, what percentage of your total business income is PROFIT for YOU personally [for unincorporated businesses], or for you AND your corporation [if own a corp].

I want to know how much you MAKE/EARN for the work you do in the business, if its behind the scene’s or a one man show whos doing the labour too…at the end of the year. how much is sitting in your [and maybe your corp’s] bank account…[that is if you didnt spend any of it…lol] and how it relates to how much money you/your corp collected.

9

Again…thats a tuff call,partly because if your a 1 man operation your “over-all expenses” are going to be much lower as opposed to a business who has 1 or more employee’s.

When you start dabbling with employee’s(legitimately) matching taxes,work comp etc changes the whole scheme of things dramatically.

10

then i guess there will need to be two classes of replies, the one man show, and the people hiring people to do the bulk of the labour, and they cant be compared with each other…yet id still be interested in hearing some ROUGH percentages if nothing else…

ie. are most ppl hiring out the labour end of things at least bringing in the targeted 33%?
i.e are most one man shows bringing in closer to 66% without employees?

somethings better then nothing, info-wise…

i realize most corps dont make much cause the money is flushed out to the indivduals, so those figures aren’t that useful, i want to know how personally profitable your businesses are at the end of the day, to spend on your famlies, houses, cars, etc.

11

Again, man - totally subjective.

However, here’s my experience:

[B]Monthly ‘admin’ overhead [/B]remains relatively static.
Vehicles, insurance, cell phones, fax lines, office expenses.
We’ll call that [B]“x”.[/B]

[B]Monthly ‘wage’ overhead[/B] fluctuates.
Let’s call that [B]“y”[/B]

[B]Monthly revenue[/B] fluctuates.
Busy months, quiet months.
Let’s call that [B]“z”.[/B]

At the end of the year,
[B][SIZE=“4”]profit = z - y - x[/SIZE][/B]

Some months, depending on the jobs being done, profit is 60+%

At the end of the year, though, everything averaged out, I’ve found (in my case), profit is [I]around 40%-50%[/I]. Not including perks.

I am seriously considering restructuring my business into a franchise model, to guarantee a minimum 50% profit model, and allow the franchisees to regulate the risk, instead. Easier math, that way.

And with me doing ZERO actual window cleaning.

12

I thought you were against franchises?

13

Having the standard operating procedures to guarantee the exact same results each and every time no matter who does the work can’t lose. Creating and having the ability to sell a franchise is a whole other ballgame than buying one.

Running your business like a franchise isn’t a bad thing.

Back to the whole profit margin thing. If you are incorporated and pay yourself, The company (you) pays taxes on the net income of the business’ overall revenue. Then you have to pay taxes on your personal income.

If your being double taxed… HUGE difference in margins.

I personally keep my personal assets protected by incorporating as an LLC.

Being an LLC aviods the double taxation issue and creates a seperate entity that you can seperate from in case the need be.

14

[B]MikeP:[/B]

I don’t know if I’m [I]against [/I]franchises, per se.

I just had a very poor experience working as as a franchisee for the company I was involved in, in terms of the way I was treated, and the complete lack of support and understanding on the part of the franchisor I was under.

Franchises are good if the numbers are right, and you can make a lot of money working one. I had a good profit model for mine, near the end especially.

However, I personally believed that I could make it on my own, and make more money doing so, so I quit and started down that road 5 years ago.

[B]Louie: [/B]
I agree 100% with you, that it would be difficult to sell a franchise, having never done so before. What, though, if I could guarantee a certain amount of work in a certain amount of time, or what if I could demonstrate the proficiency of my “system” in generating work in various kinds of markets?

It may be a better, more profitable option for me, and very attractive for a potential business owner.

[I]Locally[/I], I would only consider “leasing” franchises to others, and retain complete ownership rights. That way, franchisees can grow my business, and still make a lot of money along the way. And they could get in on the ground floor for ZERO down.

It’s very easy to talk about going on your own, and dropping big revenue numbers in conversation like you’ve already achieved them, but the truth is, most new business owners lack the time, tenacity, expertise, and/or personal fortitude needed to actually pull this off, and build their own profitable window cleaning business from scratch.

These kind of people would benefit greatly from a franchise deal, instead.

Most window cleaning business owners make $50/hr. MOST. I’m not talking about the really successful ones on here, I’m talking real world, “ask-around” stats.

I’ve found that structuring my business model properly has allowed it to consistently generate $80-$100/hr of revenue. If I can tweak that to be closer to $100-$110/hr every single day, per worker, than even if a franchisee is “only” keeping 50%, they instantly have what other window cleaning business owners have, an hourly rate of $50-$55/hr. And I’ll give them the work on a silver platter. No growing pains. No periods of desperation.

And an annual income that is very respectable.

If this was packaged properly, presented properly, and certain assurances and conditions were in place to protect the franchisee, do you think people would go for a deal like that, Louie?

[I]I’m asking in complete sincerity here[/I]…I’m seriously thinking about pursuing this model, instead.

P.S. It seems, Louie, that us Canada folk have a different corporate taxing structure than y’all down south. Different rules and responsibilities, and with them, advantages and disadvantages, apply.

15

While keeping within the realm of this thread (not getting ito franchise talk etc.) with any business profit is determined by many variables.

Plan on employee’s costing you roughly at least 34%, total overhead will vary which in essence will dictate your bottom line being profit.

You have to consider your fixed expenses (that paneless hit on) ie:admin expenses those things will be set.Some business will have a much bigger expense in advertising alone,whereas others wont.Another thing thats a variant is…supplies consumables rubber,soap,blades,scrub pads etc etc. have a bearing as well.

Plus…the bigger the company & more vehicles = more gas,insurance,maintenance etc.

My advice is…crunch your own numbers to see where you are & where you want to be!

16

If we look at Contrast’s question, he’s trying to start at the bottom line (what’s YOUR profit percentage?) and working back.

While total expenses in dollars do increase for businesses providing service on a larger scale, shouldn’t the percentage of consumables (and perhaps some other overhead expenses) against revenue basically be the same? For example, a $2 rubber and $0.25 of cleaner produce $400, 2X is required for $800, etc. And, economy of scale can, in many cases, provide a lower percentage (bulk discounts, etc.)

17

Interesting thought process? Nevertheless…maybe it be wiser for you to break down the question at hand?

After all it seems that Contrast is a solo act or…sole proprietor?

18

i know im working backwards, i just figured that most of you are doing your taxes [or have just done them] youd have the two figures on your tax forms: ‘total revenue’[gross] and ‘total taxable income’[net] and that a simple percentage could be derived from that and posted here, just to get a feel of what the average is in the two catagories of one man show, and employees.

i am a one man show, but i am looking at hiring someone soon, thus the questions…thanks for your input!

19

Contrast…that’s basically why i originally mentioned “employee costs” because you mentioned venturing into that arena.

For me…(sharing my personal thoughts here) is where i saw a BIG chunk of profit go bye bye.

It’s all a numbers game,that’s partly why im sure you’ve read some of the recent posts a few of us have shared here in regards to business costs paying hourly vs comm/piece etc.All have a bearing on your bottom line.

This past year was a wake-up call for me,i had to do some serious number tweeking to see where i was & where i wanted to be!

Just like the 33 rule …i shared much easier said then done but…doable if you stay one step ahead of things.

20

Greetings!

While still in my first year, one of the things I find difficult is determining my hourly target when I begin to think of anything outside of actual service delivery. It’s easy if I factor only the hours working in the business - cleaning windows, cleaning carpets, etc. - that I receive payment for. The problem comes in when I start to try to look at time learning, like reading boards and books, putting together estimates, cleaning and maintaining equipment at home, extra oil changes due to increased use of vehicles, equipment depreciation and replacement, non-work days in the winter and so on. So far, it seems to be about 30-40% overhead. The rest is mine to keep. Hours on the job I shoot for $40.00 +/hr. I think this is a modest target and I can say that I’ve never made less than $30.00/hr unless I plan to as a charity, demonstration or favor.

I know for sure that the spread between profits and expenses will widen as my primary marketing tool becomes repeat business and referrals. Right now I have plenty of more of my time I can sell. Any expansion or capital upgrade will close that spread again for a time.

Not having an accounting background, I have learned a great deal by working with an accountant my last quarter on '07 and my first quarter in '08. What they have charged me has been well worth it actual dollars saved as well as headaches I haven’t had to deal with.

Eric