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Re: "How much profit can a $1mil business make?


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Old 01-09-2007, 04:31 PM
dutchhook
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Hi,
Your information is correct. Many big firms have profit margins of 2-5%. ALCA used to do yearly surveys of their members and I was shocked to see that the biggest profit margin companies were those under $500,000 (as a percentage). It dropped to something like 3% for companies between 1 and 3 million, then went back up to 5% or something like that for 3 million and up. The cost of depreciation, loss of control of production, theft, interest payments on equipment because of rapid growth, and probably the biggest expense of hiring, training the right individuals. Just one wrong hire can put a company back on it's heels for a year or more.
I know companies in the 2 million dollar range that are today making 5% profit, but when salaries are figured in and perks, they are making more than 20% profit, so you can do it too.
I think somewhere around the $750,000 range a single owner has to add a layer of management. Either a production manager, or sales. That's a big step, and you're sure to lose money or keep profits low for awhile until they're up to speed. The next layer of management seems to be around the 2.5 million dollar level.
Plan well. A successful company needs 1) Meaning. What are we here for? Why are the employees here? Why do people use my service? 2) Creative Thinking and 3) Effective Execution or Effective Production.
I'm sending this to you personally to make sure you get it, then I'm going to post it generally since I don't see the button to make sure that anyone else watching the post gets the message.
Good Luck,

Steve
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Old 01-09-2007, 04:37 PM
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Steve,

Do you think most lcos fail to grow because they do not want to manage employees? Or they want to keep the employees they manage to the absolute minimum?

If so, how does one go and make that leap into management? What suggestions do you have for those who shy away from wanting to manage employees?
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