Net profit margins

[David Riding]

Just got back from the local... speaking to a few blokes who have a few pence more than me

The majority of medium sized companies as in 10 - 50 staff try to achieve a net profit of around 20% and obviously even more on their gross. Companies below these numbers obviously try and achieve a lot bigger margins (masive companies more like 3-8%). But hold on a minute these large companies are laying expensive pipes buying thousands of £'s worth of materials to build hotels, business parks and houses, us tree men don't have materials to buy, the trees are our exsisting free materials. Therefore should our margins be larger or is it all relative to time scales. Can't help thinking if a lay some gold plated sewers for the lord of Wigan in 2 days I will be loaded with 20% margins:001_rolleyes:

I must be missing something

Edited September 18, 2009 by David Riding

[Stephen Blair]

whats your profit hten david, i am kind of lost. are you more or less than 20%?

[TimberCutterDartmoor]

I was only thinking about this recently since it was my year end on 1st Sept (trading yr not £!) and still haven't a clue about my margin. What I do know is that is was crap for 08/09 due to the highest capex ever!

 

But your figures sound typical...

[David Riding]

miles more than 20% but I only have 4-6 staff

[Stephen Blair]

mate if you are doing more than 20% with 4-6 staff then i wouldnt worry, just because your new mates talked big doesnt mean they are big. as huck says, turnover is vanity profit is reality

[RobArb]

got room for one more staff member ???

[David Riding]

The point I was trying to make stevie was that companies other than in the tree business have materials to buy which increases there gross profit. E.g 4 men cut a tree down at a cost of £100 a man (£400 total cost) with a 20% margin thats only a gross profit of £100.

 

4 men lay a pipe at a cost of £100 a man (£400 total cost) and the pipe costs £400 with a 20% margin thats a gross profit of £200.

 

Like a say unless Im missing something.

Edited September 19, 2009 by David Riding

[Frank]

The point I was trying to make stevie was that companies other than in the tree business have materials to buy which increases there gross profit. E.g 4 men cut a tree down at a cost of £100 a man (£400 total cost) with a 20% margin thats only a gross profit of £100.

 

4 men lay a pipe at a cost of £100 a man (£400 total cost) and the pipe costs £400 with a 20% margin thats a gross profit of £200.

 

Like a say unless Im missing something.

 

Im confused, 20% on £800 is £160?????

[David Riding]

Frank, the cost of doing the job is £800, but you invoice £1000, therefore your gross profit margin is 20%!!!!!!

To calculate gross profit margins you don't calculate 20% of £800.

 

 

 

Gross profit calculator

 

Gross Profit Margin Calculator

Edited September 19, 2009 by David Riding

[skyhuck]

The point I was trying to make stevie was that companies other than in the tree business have materials to buy which increases there gross profit. E.g 4 men cut a tree down at a cost of £100 a man (£400 total cost) with a 20% margin thats only a gross profit of £100.

 

4 men lay a pipe at a cost of £100 a man (£400 total cost) and the pipe costs £400 with a 20% margin thats a gross profit of £200.

 

Like a say unless Im missing something.

 

The pipe layer is taking the risk that he may not receive the money for the pipe, which he has paid for.

 

The higher the risk you take in business, the higher the return.

 

Also we need to make sure we are charging appropriately for our gear, IE 4 men at £100 a man plus truck at say £90, chipper maybe £75, = £565

 

Or you can make a charge for the removal of the arisings, on smaller jobs you can consider what it would cost them if they got a skip and add maybe 50% of what that would have cost, so they are making a saving but you are covering your costs and making a little more profit.

Edited September 19, 2009 by skyhuck