What is a healthy profit margin for small business?

Рет қаралды 2,953

Күн бұрын

Small businesses need to make a profit in order to produce positive cash flow. Without profit, your business is just a hobby!
But how much profit is enough to run your small business? What should we be shooting for when it comes to an ideal profit margin?
This video gives specific targets for service-based small business owners.
0:00 Labor efficiency ratio
0:19 What should your profit % be?
1:04 Profit percentage minimum
1:35 Profit percentage calculation
1:50 Why 15% minimum?
2:30 Hobby or business?
3:50 New breakeven
4:12 Argument for 20%
4:50 LER and profit margin
6:35 Profit tolerance
7:05 Improve profit margin
8:08 Share your numbers
Mentioned in this video:
Interview with Greg Crabtree: • Interview with Simple ...
Podcast with Greg Crabtree: • Keeping It Simple With...
Simple Numbers Book: www.claracfo.com/simplenumbers
To learn more about CFO services for B2B services providers making over $1M in annual revenue, go to: claracfo.com/cfo-services/
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Hannah Smolinski is a #CPA and the Founder of Clara CFO Group. Find out more about Clara CFO Group at claracfo.com/
Disclaimer: This video is intended for educational purposes and should not be taken as legal or tax advice. You should consult with your financial professionals about your unique financial situation before acting on anything discussed in these videos. Clara CFO Group, LLC is providing educational content to help small business owners become more aware of certain issues and topics, but we cannot give blanket advice to a broad audience.
CODE: MB015N9HUSUDCHC

Пікірлер: 30

@bvandenberg1 Ай бұрын

Thank you for sharing. I shoot for a 40% profit margin after all expenses. One mistake I made was to cut costs in an effort to get to that profit margin, rather then look at ways to increase revenue while keeping costs static, and that had a fundamental difference in the overall profitability of our company.

@darkspace3316 3 ай бұрын

$192,643 at 31% Net Profit - In a tax-free jurisdiction

@ClaraCFO 3 ай бұрын

Fantastic! Do you include your owner compensation in that 31% net profit number? Or do you take distributions out of the profit? i should have mentioned that in this video :/

@BadassBusinessOwners 3 ай бұрын

I always remind my folks to keep in mind that these profits have 3 jobs: Taxes, retained earnings (reinvest in the business) then owners draw. So the more they can get to the 15% the better they set themselves up. Good info in this video. - Tammy

@joychumley6600 3 ай бұрын

Love this series! I found Greg Crabtree's book from your channel, and keep it on my desk and refer to it. Thank you!

@ClaraCFO 3 ай бұрын

it's a fantastic resource!

@Viviko 3 ай бұрын

Great video as always.

@ClaraCFO 3 ай бұрын

Thank you!

@nabeelahmed1764 3 ай бұрын

Informative. Right now I'm reading "The 80/20 Principle". Will read your recommendation. Thanks

@ClaraCFO 3 ай бұрын

the 80/20 principle is really interesting!

@kieranmcmahon3518 3 ай бұрын

Hi Clara Top of the morning to ya. listening from Ireland 🇮🇪 this St Patrick’s Weekend. ☘️ just started listening to your channel. Thank you for the clear concise explanation. Regards Kieran

@ClaraCFO 3 ай бұрын

Thanks for being here! Happy St. Patrick's Day!

@user-xs3hd2ho6o 3 ай бұрын

Childcare is limited it seems. Asking families to pay the true cost of care may not be feasible. We’re at 12%. Labor efficiency score is 1.58!! Omg! But that’s why the sector is screaming there needs to be more support.

@ClaraCFO 3 ай бұрын

Oh yes - childcare is an incredibly hard business to reach this target profitability. It is really great that you can be at 12% though! Most facilities I've talked to are operating at a loss! The best thing you can do to help with profit % is to be really efficient with your labor hours and keep overhead costs low. Also increase prices every year - though I am sure you already know that!

@naveenkgeorge2000 3 ай бұрын

Great video

@ClaraCFO 3 ай бұрын

Thanks for watching!

@clays1507 7 күн бұрын

Hannah… I always love your content! Clay

@ClaraCFO 6 күн бұрын

Hi Clay! Thanks for watching!

@jasonalcon7728 3 ай бұрын

Great video as always. Do we include employer paid taxes in the margin calculation?

@ClaraCFO 3 ай бұрын

Do you mean payroll taxes? Those would be included. Or are you talking about your federal tax payment? This is BEFORE your federal tax payment.

@naveenkgeorge2000 3 ай бұрын

is it Net profit/Revenue or Operating Profit/Revenue

@nabeelahmed1764 3 ай бұрын

How much money we need to save or don't touch when we get profit? Like you mentioned in your video like more sale doesn't mean your business is doing fine. right? My question is if everything is doing finem then how much we have to save from profit?

@ClaraCFO 3 ай бұрын

I like businesses to have 2-6 months worth of operating expenses saved in their business. Once you have this accumulated, then you can be more flexible with how you use your profits. You may choose to distribute more or invest in other things in the business with additional profit. I will make a video on this!

@nabeelahmed1764 3 ай бұрын

Thanks for your advise. Appreciate it.

@IAMSADIDDY 3 ай бұрын

Do you have a video that defines a profit margin even more?

@ClaraCFO 3 ай бұрын

What are your questions? I can make one!

@roberthickenbottom4719 3 ай бұрын

You were trying to scold us for not subscribing and liking. This is the first time I ever watched your show, but it turned me off when you did that. I looked past it, and you do have good content.

@ClaraCFO 3 ай бұрын

haha! that's funny - certainly not my intention!

@lululets6338 2 ай бұрын

This is valuable information you should be paying for, yet you get to enjoy it for free. Actionable advice & all… and Clara finds herself having to ask people to subscribe because of mentalities like yours. It goes without saying that these videos take her time, effort & money. The least we can do is just subscribe & when she finds herself having to remind us, follow & like without complaining (I’m only referring to people who see value here & the need to keep coming back). Please have a heart!