Profitability Margin

[NJarborist]

Business owners. Does anyone have an idea about what approximate profit margins I should expect or not expect as a new starter? And how it changes over the time? And also as a new starter I would really appreciate any input on what specific things (deals, employees, customers..) should be avoided by someone new in this business.

 

[Acer]

Business owners. Does anyone have an idea about what approximate profit margins I should expect or not expect as a new starter? And how it changes over the time? And also as a new starter I would really appreciate any input on what specific things (deals, employees, customers..) should be avoided by someone new in this business.

All depends, of course. One forum member based on your West coast was keeping 50% of his turnover as profit. Here in the UK, it's nearer 20% - if you do everything by the book, and need to pay for absolutely everything, such as yard/workshop space etc. it could be even less.

The more corners you cut, in terms of getting rid of waste, safety, complying with the law, the more of your turnover you keep, but i wouldn't recommend that path - people with that sort of approach never seem to get anywhere, even though they think they're doing really well.

ps. it's cash flow problems that kill most new businesses, even if they are profitable on paper.

 

[Ekka]

Great point Acer.

At a recent seminar by Jeremy Barrell he used 15% of turnover as the average UK profit margin for a typical 4 man crew.

Now, my stats tell me it's 18% for me here, taking from real life figures. But you could manipulate that to 30% with some clever accounting.

 

[kkottemann]

I am in my second year of business as a legimiate business, i.e. equipment, insurance, workers comp. ect... My profit margin this last year was negative. I have heard as a startup small business you can expect to loose money for the first 5 years.

 

[Ekka]

You shouldn't lose money any year.

But it depends on how much you spend.

In the beginning you need lots of gear, if you are buying gear like there's no tomorrow and forking out big advertising bills you are on the treadmill.

Be careful, coz the treadmill doesn't travel at the same speed all the time.

 

[kkottemann]

I surely make good money. The deposited invoices can really add up in ayears time, but what i am saying untill the BIG GEAR is paid for (grapple truck, chipper, stump grinder, skid steer) it will be hard to turn a net profit. Mabe this does not hold true everywhere in the U.S. or world for that matter. It also depends on how much work you are able to sell. Once I get everything paid for, I will have a net profit margin.

 

[BlueRidgeMark]

To see a true picture of your profitability, you need to amortize your large expenses. IOW, if you buy a chipper for 36,000, and it has a 6 year life expectancy, then it is costing you 500 per month. 6 years = 72 months. 36,000 / 72 = 500 per month.

That will give you a better picture of your profitibility.

Cash flow is another matter.