Whats your return

Discussion in 'Starting & Running a Business' started by Blacky, 5th Sep, 2016.

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  1. Blacky

    Blacky Well-Known Member

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    Im keen to hear what % profit people are making when measured against turnover - and what industry are you in?

    From what I have seen annual profit of 20% seems to be at the top end. Consistantly - 3% was the lowest that I saw - but this was a very unique business model with essential zero input (including cashflow) and zero risk.

    Im trying to get a guage of what revenue I will need to target before even considering throwing in the day job.

    Blacky
     
  2. Simon Hampel

    Simon Hampel Founder Staff Member

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    I think that's very much a "how long is a piece of string" type of question. It varies enormously between industries and business models.

    Are you talking retail? services? construction? manufacturing? IT?

    Will you have capital costs? Will you have staff? Will you have large fixed overheads? Will you have cost of goods? Will you be working out of your home/garage?
     
  3. Ace in the Hole

    Ace in the Hole Well-Known Member

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    Retail.
    1 mil Profit on 4 mil turnover.
     
  4. moyjos

    moyjos Well-Known Member

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    Nett profit is not always a true indication of the bottom line either. For instance, the last few years I have reinvested a lot of nett profit back into the business (upgraded Utes, bought some new machinery, gave key staff a pay raise over award, paid off some debt.) hence the bottom line has dropped from~25% to ~20%

    My gauge for return has always been "am I making the wage of my job?" Eg. I do the admin for approx 20hours..what could I earn if I just got a job doing the same thing..my biz had better pay me at least that plus some for the hassle.

    My shops were bought as going concerns, so the job was already there. Hubby's biz was started from scratch. We gave it 6months to provide the base wage for a security screen fabricator (not hard, they don't earn much :(. )

    When I get into the office, I will post my "reverse P&L" spreadsheet. In it you plug in your desired bottom line and a few other variables and it tells you how much in sales you need.
     
  5. David Z

    David Z New Member

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    Very dependant on industry. Benchmarking reports can give you a gauge as to where your business NP% should be based on its size etc.

    Many other factors to consider such as the stage of the industry life cycle or more importantly stage of your business's life cycle, startup, second year etc.

    NP is not the holy grail in evaluating a successful business.

    One thing many small business's fail to do which may have been mentioned above, is to factor in a nominal amount for the directors (if in an active role) wage comparable to what you would have to pay someone to do your job. Many clients say they make 20%, but learn the harsh reality that they have just bought themselves a wage. Catch cry from the book E Myth - trading your old employer (old boss) for your business (new boss).

    I wouldn't work for myself for an extra 5-10k a year. Risk is not worth the reward. I want to see 100% increase in my income. Before people talk about "being your own boss" and "answering to myself", that isn't why people go into business.

    Grant Cardone - "who's got my money"..
     
  6. Ace in the Hole

    Ace in the Hole Well-Known Member

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    Grant Cardone is awesome !

    I don't even think 100% increase is enough to "be your own boss".
    I'd probably work for someone else for a couple hundred a year, as long as it's not too demanding, but wouldn't work my own biz for less than a half mil as my share of income.
     
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  7. FrivolousPanda

    FrivolousPanda Well-Known Member

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    The ATO publishes small business benchmarks which provides a little insight into how profitable businesses in various industries are. <Link>

    Remember that there is a lot of flexibility in accounting so I would use the numbers as a guide.
     
  8. bob shovel

    bob shovel Well-Known Member

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    Have you narrowed down your ideas?

    Or on the lookout for opportunities and gaps in the market?
    Is there anything close to your field of work you can look into?

    This is a good podcast about taking advantage of opportunities and some hard work with mike rowe and tin ferriss.
    The Importance of Being Dirty: Lessons from Mike Rowe | The Blog of Author Tim Ferriss

    I think there's a jim rohn quote to along the lines-
    Opportunity comes to those with skill and ability
    I think just getting out there and learning, talking and exploring opens lots of opportunities.