How many years to double net profit ?

Surprised to see net profit doubles so quickly
How has your net profit performed ?

 

You need to add another field... “it depends”

 

The fact that the majority voted 8 to 10 years is concerning.

Agreed with hakuri it does depend.

I believe, and having seen and worked with hundreds of businesses over the years, the ones that do it within 3 to 4 years focus on sales (marketing strategies), data analytics (kpis for sales, expenses and marketing), employee satisfaction and internal processes.

Im amazed at businesses who spend nothing on marketing or external people to help if this is their weakness and expect their business to grow.

The business im an associate director of spends well over 60k a year on marketing. Sales growth has been around 15% to 20% per annum year on year for the past 5 years. This year will once again be our best year ever. In fact last month was our highest sales month since the business started 10 years ago.

Many businesses dont even have a written plan. It sounds boring but its the starting point. If you havent planned things out then no wonder you end up at an unexpected destination.

 

Perhaps those responses have different interpretations of net profit?..... some investors actually think about this in terms of capital rather than cashflow.

To complicate matters further, in my experience, many investors struggle with concepts such as nominal vs real value and NPV. This could provide further ambiguity interpreting responses as, IMO, many responses may have a different POV in regards to defining Net Profit, so it may be safe to assume that not everyone has the same understanding of the question.

 

Agreed and understanding those defintions and what they mean are very critical. If you dont know what they mean any measurement against them will be less meaningful.

 

Normalised EBITDA is probably a better KPI

 

Net Profit interpretation I have assumed is
Gross rental less all expenses including interest
A example would be $1k profit first year
doubles to 2k,4k,8k,16k,32k,64k,128k,256k,512k,1024, 2.048m
So 11 doubles say 55 years average 5 years to double.
Exclude taxation

 

What's the definition of net profit?

 

If investors purchased in the last property boom cycles of Melb, Syd its doubled in 3 years

 

Gross Rental less all expenses except taxation
Eg
Rental less
Interest
Rates
Water
Repairs and maintenance
Asset replacement to maintain income (I find it is close to my depreciation)
Unrecoverable outgoings
Administration cost
salary and wages
Commissions
valuations
So pretty well treating the rental business like a standalone entity separate from your personal interest.

 

if its going to incorporate all of that i think you need another option for 100+ years!

given that property doubles every 7-10 years tradtionally and many are saying this and the last cycle the doubling will be 10-15 years (yes debateable), i reckon 15+years

 

I was only looking at the net profit not the value of the property
My tax bill has been doubling every 5 years
If it double again it will be a $1m :-(

 

I can think of worse problems

 

I am quite confused by the question...

 

I just put a house in regional NZ on the market. Bought for $130k 9 years ago, valued now at $280k. All the growth happened in the last 4 years. Very glad I bought a few

 

Kick back!

 

I paid down debt aggressively/filled offsets, makes a huge difference in NET profit growth.

 

392k 2016 purchased
$600k Last Val 2018

 

If were talking ROE, I think all my deals have returned more than 100% ROE in the first 12-18 months and 100s of % ROE in the first 5 years. If we're talking asset doubling in value, we did the calculations not long ago and we averaged 7.5 years of doubling in value. Do I see that doubling rate continue over the next 20 years? No idea but I invest part of my portfolio for 1. Profits and 2. Long term wealth base. So doesn't really concern me.

 

The morale of this is if you start just 10 years earlier your Income at a certain age could well be double.
So instead of say $500k pa you could be on $1m pa