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One thing I like about your question is the fact that you're ASKING it. Trying to quantify profit.

Most people never even get that far.

They treat profit--especially if it is that of their own business--as some ethereal thing they will "get later" if possible.

"To manage we must measure" is a business maxim and a fundamental one for me. If we don't build Profit into our revenue equation, we're unlikely to get any. And so asking this question and building profit right into your revenue target is a powerful idea nearly all small business owners totally miss.

As for an answer...that amount is really up to you. What do you need to survive? There are so many variables we don't know about: what kind of business, what scale, what paths to market are you using, etc. etc. that affect costs, together with the price tolerance of your marketplace, that it's not possible to give an "average" answer.

When I train business owners on how to set their operation up for success, I recommend 20-30% of revenue be built in as a monthly amount for profit. However, this is usually for consultants, and may not be possible for other business models. Sometimes 5% profit is what's achievable, say for a commodity provider, and if they make money with that, OK.

Have you done any studies of comparative firms in your niche?


Answered 5 years ago

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