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  1. #41
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    Quote Originally Posted by adama View Post
    About 60% but as im self employed, thats simply my profit to cost ratio, my time and my profit, dividends bonuses etc all have to come out of that. Use to be over 80% but back then i was doing far more mantinance not manufacture hence costs and especially material costs were tiny.

    I don't sell my self based on time hence i keep no track of what i actually work a week, this point self employment is just more a way of life, When im bored, when im hungry, when a customer is moaning, when i want a new toy, when i need funds for a bill, i get off my ass and go make more money kinda as simple as that really. Paying 1/3rd as tax makes it kinda pointless wasting more time on generating income that i could spend doing something i enjoy or doing something for my self i don't yet have to pay tax on. Am never going to be a millionaire, can't see the point in working so much of the week for the tax man trying, ergo i chose a far simpler cheaper life style and simply don't give a shit if the neighbours car is shinier than mine!
    Sami, you only have 28 days to file your tax return, so the irs, inland revenue or who ever it is you have to pay it to up there in the north of Anglia are going to know it soon enough anyhow. If anyone is so daft as to try and swindle the tax man in a largely digital economy, they either need to be a genius or flat out dead stupid. These days i see less than a couple of hundred quid in cash customers a year, saving £60 or so in tax by trying to fiddle the system just does not seam a very logical - high rewards game plan. Ergo i just stick it all through the books properly. If im going to do something illegal, i sure as hell want a bit higher reward to risk ratio than a 30% saveing!!

  2. #42
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    If you buy and resell stuff then the cost of goods sold does not include any of your own labor. If you manufacture and sell the same stuff, then the cost of goods sold includes all direct labor.

    Everything I've done in the past year has been subcontract work for a friend's business. He does a few $million worth of business per year, so his buying power for material dwarfs mine. So he supplies all material.

    By the OP's method of determining margin, my only costs would be coolant and tooling. That would easily put my margin above 95%.

    If that ain't a useless number, I ain't never seen one.

    I can't remember ever doing anything for less than 6X cost of materials, and that 6X is rare. Last job I did was 500 pcs @ $18 ea. Customer supplied blanks cost him $2 each. Assuming I could buy the blanks for the same price as my buddy paid, I would've been at $20 each for the parts, or 10X material. I used $80 worth of facemill inserts, $40 worth of drills and taps, $12 worth of coolant concentrate, and about $25 worth of miscellaneous steel for a couple fixtures and some funky vise jaws I had to make. No shipping, but about $20 in gas to pick up the blanks and deliver the finished parts. No credit card charges as I email an invoice and a check shows up within a week. Almost forgot... ran these things thru my vibe too, so I guess I wore a few dollars off the ceramic doohickeys there. Call it 5 bucks to be generous.

    I figured 110 hours to do the job but had a better idea of how to do them between the quote and the PO, so I got them done in 85 hours. Did okay, but that saving just made up for one of those previous 3 day jobs that took a week to do. Everything I own is old and paid for, but it still costs me about $14/hr to cover utilities, insurance, property taxes, etc.

    So lemme see... $1000 for the material plus another approx $200 to cover all the other stuff the OP uses to figure cost in determining "margin". If my margin was 55% then my cost would be 45% and my selling price would be $1200 divided by .45, or $2667 rather than $10,000.

    Seriously, if material and the few other minor things the OP listed total up to 45% of his gross volume, and he's actually making machined parts rather than just sawing and shipping chunks of bar stock, he's got problems way more serious than an inability to determine legitimate costs.

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  4. #43
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    Quote Originally Posted by adama View Post
    Sami, you only have 28 days to file your tax return, so the irs, inland revenue or who ever it is you have to pay it to up there in the north of Anglia are going to know it soon enough anyhow. If anyone is so daft as to try and swindle the tax man in a largely digital economy, they either need to be a genius or flat out dead stupid. These days i see less than a couple of hundred quid in cash customers a year, saving £60 or so in tax by trying to fiddle the system just does not seam a very logical - high rewards game plan. Ergo i just stick it all through the books properly. If im going to do something illegal, i sure as hell want a bit higher reward to risk ratio than a 30% saveing!!
    All done and filed on the 20th December Adam mate, ..........hell I even paid the accountants bill as well.

    Totally agree with you, Income Tax evasion is a waste of time, the rewards just don't match the penalty.

    These days I am very wary of cash payments -for anything to do with my business, .even if guys don't want an invoice or receipt, I still raise one and put it through the books.

    You have no doubt, as I have, heard of ''the guy'' who thought he was being oh so clever and basically took the Tax man for 000's, ........and don't they scream when he catches up with them ..........like a self employed plumber I knew, apart from not keeping his mouth shut! (gobby twat) his new caravan went down as a site hut, new outboard for his boat a generator, his wife had a real splurge on smart (expensive) clothes - they were her work clothes etc etc etc etc.

    By the time the taxman had finished with him, he was moaning it had cost him 4 X what he'd ''saved'' - like I said - a twat!

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    Quote Originally Posted by RedBaron View Post
    There's no such thing as a stupid question, just stupid fucking people..............like you.
    Thanks for clearing that up for me. I had no idea.

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    Quote Originally Posted by RedBaron View Post
    There's no such thing as a stupid question, just stupid fucking people..............like you.
    Along with useless cunts like you.

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    Quote Originally Posted by wheelieking71 View Post
    Thanks for clearing that up for me. I had no idea.
    RedBaron Post #1 Right now, January 2nd, 2018, what was your margin ?
    Post #8 I looking for a feel for margins across the board in manufacturing
    Post #21 rather, I asked what is your operating margin

    As you can see from the definitions below, when you ask about our margin, we use the meaning associated with the word margin.

    If you want gross margin, that is a different animal, but that was not what you asked for. In post #21, you change your request to operating margin, which is yet another number.
    We can only respond to what you post, not what you are thinking.

    Gross margin is a company's total sales revenue minus its cost of goods sold (COGS), divided by total sales revenue, expressed as a percentage. ... The higher the percentage, the more the company retains on each dollar of sales, to service its other costs and debt obligations.

    Margin
    is the difference between a product or service's selling price and its cost of production or to the ratio between a company's revenues and expenses.

    Net margin is the percentage of revenue remaining after all operating expenses, interest, taxes and preferred stock dividends (but not common stock dividends) have been deducted from a company's total revenue.
    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company. This amount includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good.

    Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc. It can be calculated by dividing a company’s operating income (also known as "operating profit") during a given period by its net sales during the same period. “Operating income” here refers to the profit that a company retains after removing operating expenses (such as cost of goods sold and wages) and depreciation. “Net sales” here refers to the total value of sales minus the value of returned goods, allowances for damaged and missing goods, and discount sales.

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  10. #47
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    Other than none of your business, it was OK until the the $40k loss on my wifes side of the business sucked me dry. A big fat 0

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    Quote Originally Posted by Limy Sami View Post

    These days I am very wary of cash payments -for anything to do with my business, .even if guys don't want an invoice or receipt, I still raise one and put it through the books.
    Exactly, in my case its a couple of customers that pay me cash out of petty cash and another with a small village shop which gets stung - charged by his bank for paying cash in hence like to pay cash but equally very much needs a receipt too! All in all a couple of hundred quid i typically get as cash i just pay it out - draw as my income and that keeps me in cash for the year, everything over here takes card payment and that’s just so much less effort! Really not sure how much longer cash is going to exist here in the uk, sure seams to account for ever less payments a year.

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    Quote Originally Posted by adama View Post
    Exactly, in my case its a couple of customers that pay me cash out of petty cash and another with a small village shop which gets stung - charged by his bank for paying cash in hence like to pay cash but equally very much needs a receipt too! All in all a couple of hundred quid i typically get as cash i just pay it out - draw as my income and that keeps me in cash for the year, everything over here takes card payment and that’s just so much less effort! Really not sure how much longer cash is going to exist here in the uk, sure seams to account for ever less payments a year.
    That's pretty much how I work it Adam, paying cash in to my bank costs, plus it's a 6 mile trip and parking etc etc.

    Do you get many BACs payments? ......if I get 6 cheques a year it's all I do get, .........but as I won't do online banking (don't trust the bastards) I can't pay by BACs.

    As for debit cards, - I think they're the best thing since sliced bread, .if only because you know where the gelts gone, I carry a few quid and an ''emergency'' tenner - not that that will get you far today.

    Plus if I was mugged and they beat my PIN number out of me - they'd not get far on what's in my current account.

    On another tack - I had to write a cheque the other week, .......at one time I'd write 10 a week without a 2nd thought, ......it was that long since I'd written I cheque, I opened the book and it hit me - ''WTF do you do with one of these?''

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    About 99.97% RB- total pfofit

    (Not including taxes, salaries, office supplies, goverment fees, office rental or electricity.)

    We sell out about 5000 pages of printing paper per year for 300-400k and the paper costs about 40 bucks to purchase.

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    Quote Originally Posted by RedBaron View Post
    There's no such thing as a stupid question, just stupid people who as questions
    Fixed it for you . . .

    On a more serious and mature note . . . we target about $250k / employee gross income and generally shoot for 10% EBITDA

    I know of no way to boil it down to gross margin with as much variety of engineering, manufacturing, training, repairs, field service, consulting work that we do.

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    As posted by Toolroomguy their are lots of different margins.
    Is the opposite of your question "What percentage of your overall sales is raw material and outside services"?

    This number does not mean a lot unless you are comparing apples to apples.
    A repair or customer supplied material shop will have a very small about in these accounts.

    Let's say you make carbide tools.
    If you are making CNMG carbide inserts it may well be a very large portion going out the door here. Lot's of money moving, none of it staying.
    A carbide round tool has a smaller percentage purchased as more of the product is labor and machine time.
    So it does no good to even compare this number between two carbide shops.
    It is a number to watch but only in comparison to yourself in history and only if your product mix stays fairly constant.

    There is only one number or percentage that actually counts in the end and that is after tax profit.
    Hopefully this is not red and you did not have to short your own weekly paycheck to get this color on the balance sheet.

    I am a numbers guy, actually like digging in and analyzing such numbers on a monthly basis but know well that every business is different.
    Amazon works on very small "margins" here yet is sort of successful.
    My shop is not your shop and not Mickey-D's, 50% may be very good or a path to certain doom.
    What you are referring to is simply a number off the books, there is no good, bad or optimal to it.
    Yes a number you watch for warning signs but only in respect to yourself and your own history. Meaningless outside your shop.

    I do get that you want to benchmark against others as we all want to grade ourselves to some point and know how we are faring but it does not work well here.

    I'll toss this out as a real life number set example:
    During the "boom" days and trying to figure out how to bury the profits around 30% as your defined margin and we are buying offshore boats, island property in Florida and looking at new airplanes. Life is good.
    During the rough days of trying to stay alive and should I close the shop, 72% margin and wondering if to pay the utility bill or buy food. Life then means finding a 2nd shift job somewhere.

    You are looking to compare apples to oranges and it can not be done.
    One reads this book number and compares it to yourself. No other should matter.
    Bob

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    CarbideBob managed to write a very good post that hopefully RB can absorb. Most of had a bit (lot?) of scorn and F-off. RB stick around and absorb, you might learn something that will make you more money while working a little less.

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    Quote Originally Posted by Limy Sami View Post
    That's pretty much how I work it Adam, paying cash in to my bank costs, plus it's a 6 mile trip and parking etc etc.

    Do you get many BACs payments? ......if I get 6 cheques a year it's all I do get, .........but as I won't do online banking (don't trust the bastards) I can't pay by BACs.

    As for debit cards, - I think they're the best thing since sliced bread, .if only because you know where the gelts gone, I carry a few quid and an ''emergency'' tenner - not that that will get you far today.

    Plus if I was mugged and they beat my PIN number out of me - they'd not get far on what's in my current account.

    On another tack - I had to write a cheque the other week, .......at one time I'd write 10 a week without a 2nd thought, ......it was that long since I'd written I cheque, I opened the book and it hit me - ''WTF do you do with one of these?''

    I love online banking, i think it more secure than going there and you dont have to deal with the useless staff or all the crap they try and offer u or the retarded were only open when every one is at work hours, not stepped foot in a bank for a decade now. Only write one cheque a year for the house insurance thats it as they never include the bacs payment details the useless wankers! I hate em but there tied to the insurance so its just to much agro to change else were. Everything else is bacs or paypal here going in or coming out, know some people slam it, but have never had a issue with pay-pal at all.

    Had a couple of issues with the bank visa debit card, but they got fixed at no cost to me so hay ho (both hacked cards (fuck u RS components and your dodgy French staff!! the only thing that card was used to buy in nearly 2 years and then 2 months later its hacked and used in French spending sprees coincidence same account different card number gets hacked again 8 months later, agian 2 months after paying same supplier yet again???) Neither really the banks fault, both the same card more or less 2 months to the day after i made a payment to that supplier and then again the same a later just means i avoid RS components these days.

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    Thanks Adam - that's handy to know about RS, I only have to odd couple of bits a year from them, ........but RS of all people getting dunova?

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    50 posts before Motion Guru talks about EBITDA .
    Learn it, live it, love it. And then you can talk about your margins.

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    Quote Originally Posted by motion guru View Post

    generally shoot for 10% EBITDA
    Please clear up something for me. I usually see earnings expressed as a dollar amount , not as a percentage, such as a company selling for 5 -7 time ebitda.
    10 % of what... sales?

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    Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) Definition & Example | InvestingAnswers

    We are on a WIP accounting basis. Let’s say we engineered, manufactured, shipped and commissioned $10 million in machinery in a given year. Our goal is to post $1 million EBIDTA. (This is after payroll, bonuses, 401k contributions, etc.)

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    Quote Originally Posted by RedBaron View Post
    You’re confusing net margin with gross margin or deliberately obfuscating the two. I didn’t ask what was your naked, pure net profit after all costs are factored in; rather, I asked what is your operating margin for the products/services you provide during last year.
    Actually you asked for your margin and didn't qualify it. Net margin is obvious profit, gross margin is revenue less cost of goods sold. The challenge is there are lots of ways to come up with COGS which usually include variable costs. In most manufacturing businesses labour is considered a variable cost, and usually things like rent, real estate tax, insurance, the book keeper, heat etc are overhead and paid out of gross profit. But its far from universal....see enough statements and you'll see different ways things are represented. Also, different types of businesses are suppose to treat things differently - services, retail, manufacturing, distribution etc.

    There are a lot of ways of coming up with COGS. As a sole proprietorship, and you're not putting labour in COGS, what expenses do you have in COGS other than material (which seems a bit meaningless)?

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    Quote Originally Posted by Toolroomguy View Post
    Please clear up something for me. I usually see earnings expressed as a dollar amount , not as a percentage, such as a company selling for 5 -7 time ebitda.

    its a rough approximation of cash flow. Its saying the business sold for 5-7 times the value of its cash flow (which is very high imo). If ever there was a number with more BS around it than EBITDA multiuples, I don't know of it. You can readily calculate what public companies trade at as an EBITDA multiple, simply figure out EBITDA from the income statement (its just adding and subtracting), divided by shares outstanding, and divide the current share price by this. EBITDA also criticized as a metric as depreciation is real - machines really do wear out and their replacement should come out cash flow, not be added back in

    Where it get bandied about is in private company sales and why I say there is so much BS as very few ever really know what the EBITDA was in a deal....{plus it has to be normalized to mean anything and no one but the parties thereto know what that number is. Unless you were party to the deal and did the calcs, no one knows what EBITDA multiple a deal happened at. If you ever read a valuation, they're 50 pages of BS and toward the end the valuator conjures and assumes an EBITDA number and from it proffers a value. The only farkin thing that matters to the value is the multiple, and its just assumed! And then they present their $8000 bill.


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