Profit margins of shops in the $250k - $750k range?

[FatCat]

As my little business continues to grow, we've added a 3rd employee and I need to sit down and do a thorough analysis of our expenses and profit margins as we move forward. Our margins vary wildly month to month and season to season - so sometimes its been hard to get a good picture until year's end. I guess the bottom line is that each year we pay our bills with a little bit left over, wondering where we "should" be...?

Anyway, wanted to know if anyone would be willing to share their profit margins for shops in the $250k - $750k/yr range? Just looking at the percentage not actual numbers, to see how we stack up and get a picture for similar shops.

*If you'd rather do this via PM or on the premium side, I'd be happy to do this and share our numbers as well.

Thank you!

 

[Johnmpcny]

The sign study by NPOA shows owners profits in the 10-30% and some yes lower. Sales per employee in the $100-$200 range and profits are linked to that. If your under $100,000 per employee you are likely not making money.

Bookstore

 

[FatCat]

Since my new hire just started 2 weeks ago, and is basically a greenhorn, will be some time before his output makes enough input for me to evaluate until further down the road. Other than that we are well within the 10 - 30%, just curious if that really is what everyone else is seeing on their end. Thanks for that reply!

 

[equippaint]

Most businesses, signs or others, I think will fall in the 10-30% range. Usually the larger you get, the lower the margins seem to be although your EBITDA should steadily increase. In my experience, the capital expenditures, insurance, workers comp and other general expenses increase exponentially while revenues increase linearly as you start growing beyond 2-3 employees. You could pull off a 40-50% margin on 100k gross working by yourself but no way will you hit 40-50% on 1mil with all you need. 15% is around where I think you would be at 750k, from someone not in the sign business. This is why there are so many posts with people wanting to down size. Twice the income comes with 20x the headaches.

 

[Gino]

The old-timers in business..... any kinda business other than the food industry, will tell ya, while you are a one to two or three man shop, you'll make some good money. Once you hit 5 or more, you start to lose, until you reach 15 to 20, then you start making good money again. When I look around, that seems to be the case, from kitchen cabinet makers..... to repair shops for automobiles..... to construction companies.

 

[Christian @ 2CT Media]

We pay cash for all of our equipment so our numbers are skewed. But last year we were at $650k with 4 employees including 2 owners and we ended with a little over 18% profit but we purchased $80,000 worth of equipment (HP Latex 360, Flatbed Applicator, and iEcho Flatbed cutter 50% payment) before that number.

 

[ProPDF]

We pay cash for all of our equipment so our numbers are skewed. But last year we were at $650k with 4 employees including 2 owners and we ended with a little over 18% profit but we purchased $80,000 worth of equipment (HP Latex 360, Flatbed Applicator, and iEcho Flatbed cutter 50% payment) before that number.

Without opening a can of worms....is there a reason you don't take advantage of equipment loans and their tax write offs? I know this can be argued at various angles on both sides of cash vs loan.

 

[Christian @ 2CT Media]

Yeah, we do... We buy on credit and pay it off within 6months and we only buy when we have a large job or the cash in the bank.
One reason is we don't like to have debt, we have watched many business fail because they become debt strapped. The other reason is if you do the math, any loan above 4% (depending on your tax bracket), the tax savings vs the finance cost is heavily in favor of the bank.

 

[FireSprint.com]

The old-timers in business..... any kinda business other than the food industry, will tell ya, while you are a one to two or three man shop, you'll make some good money. Once you hit 5 or more, you start to lose, until you reach 15 to 20, then you start making good money again. When I look around, that seems to be the case, from kitchen cabinet makers..... to repair shops for automobiles..... to construction companies.

This seems to be pretty true.

 

[Christian @ 2CT Media]

This seems to be pretty true.

I think this is true for the shops who rely heavily on credit. It seems that most companies in the 5+ employee range also have 15%+ gross revenue in debt or monthly payments in excess of 30% on monthly income.

 

[equippaint]

I think this is true for the shops who rely heavily on credit. It seems that most companies in the 5+ employee range also have 15%+ gross revenue in debt or monthly payments in excess of 30% on monthly income.

Sounds about right, I'd venture to say many are well above that in other industries. I'm conservative with debt financing, 9 employees including myself and on average were about 20% of net and 6% gross with monthly financing not including our property. We buy all of our equipment under 10k outright, and finance most items above that. We could afford to not use debt in most instances but if times got real tough, Id rather have cash than assets. We have a decent line of credit that is unused that I'd tap into to keep us running if it got bad before throwing in the towel.