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  1. #21
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    Quote Originally Posted by Toolroomguy View Post
    How did you know I serve on the BOD?
    I am just trying to help you understand your 55% margin is not a number that will survive any scrutiny. You must include all costs of good sold, depreciation,interest expense, current portion of long term debt, professional fees, office supplies, taxes, accrued wages and vacation, etc ad nausium.
    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. I don’t care if you’re successful or not, I don’t care if your depreciating a million dollars in machinery, I don’t care what you’re paying in taxes, I don’t care what your receptionist makes.
    You obviously don’t know the number for yourself/your company or you would have provided a percentage for one or both by now.

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    By a simple definition…and correct me if I’m wrong…your stating …”After I pay all my cost (except for my time) every dollar I get in I get to keep 55 cents”. As a one man shop, It doesn’t matter how much you made in this case.

    Example: Let’s say you billed 150K last year… so in this case you declared a gross income of 82,500 dollars.
    As a one man shop you can make a lot more profit for the number of hour you can bill because your labor cost is only for yourself.

    It’s ironic that in a lot of cases you may make less with a two or even a four man shop but hopefully at some point the larger you get you will cross over into ending up with more money in your pocket.

    I always tried to look at a business as its own entity and I even though I owned it I was an employee. So in that case it would be like trying to compare apples to oranges. Your margin will not work for other than a one man shop .

    Example, If my business billed 3 million last year and I paid myself 80k then took a 3 % bonus from the businesses end of year profit of 20% the result is I would receive would be 98K of taxable personal income. The remaining 17% reinvested into business.

    By your definition I guessing my example would be about what 14% margin…err…hummm…doesn’t really work… I have value added to the business but not me because it’s not the same entity. So maybe it would be only about 3% margin…see it doesn’t really work.

    I MADE more in take home and near 10X more in profit than you did, but by your definition the margin cannot be figured and show whick way 'up' or 'down' is good.

    For what it's worth, your 55% in your case is a very good ratio...

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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. I don’t care if you’re successful or not, I don’t care if your depreciating a million dollars in machinery, I don’t care what you’re paying in taxes, I don’t care what your receptionist makes.
    You obviously don’t know the number for yourself/your company or you would have provided a percentage for one or both by now.
    An awful lot of words for "I don't care".
    You know, as you mature, you might find it wise to learn from people who have more knowledge than you.
    You will find your last sentence under the logical fallacy "false dichotomy".

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    Quote Originally Posted by scadvice View Post
    By a simple definition…and correct me if I’m wrong…your stating …”After I pay all my cost (except for my time) every dollar I get in I get to keep 55 cents”. As a one man shop, It doesn’t matter how much you made in this case.

    Example: Let’s say you billed 150K last year… so in this case you declared a gross income of 82,500 dollars.
    As a one man shop you can make a lot more profit for the number of hour you can bill because your labor cost is only for yourself.

    It’s ironic that in a lot of cases you may make less with a two or even a four man shop but hopefully at some point the larger you get you will cross over into ending up with more money in your pocket.

    I always tried to look at a business as its own entity and I even though I owned it I was an employee. So in that case it would be like trying to compare apples to oranges. Your margin will not work for other than a one man shop .

    Example, If my business billed 3 million last year and I paid myself 80k then took a 3 % bonus from the businesses end of year profit of 20% the result is I would receive would be 98K of taxable personal income. The remaining 17% reinvested into business.

    By your definition I guessing my example would be about what 14% margin…err…hummm…doesn’t really work… I have value added to the business but not me because it’s not the same entity. So maybe it would be only about 3% margin…see it doesn’t really work.

    I MADE more in take home and near 10X more in profit than you did, but by your definition the margin cannot be figured and show whick way 'up' or 'down' is good.

    For what it's worth, your 55% in your case is a very good ratio...
    If you think of the McDonalds company, they know exactly what the gross margin is on any of their products, down to the fraction of a penny. A Big Mac is X cost for bun, burger, condiments, paper wrapper, etc, and the margin is the amount the customer pays beyond that. It does not take into account the pay of the McDonalds employees, the heating & cooling of the restaurant, the electricity for the lights, the grease in the fryer, or the interest paid for the burger machine, or the taxes, returns, call backs, waste, the CEO’s pay or the landscaping for the McDonalds corporate headquarters.

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    Quote Originally Posted by scadvice View Post
    By a simple definition…and correct me if I’m wrong…your stating …”After I pay all my cost (except for my time) every dollar I get in I get to keep 55 cents”. As a one man shop, It doesn’t matter how much you made in this case.
    You're absolutely right in that case, which is why it doesn't make any sense by saying I made zero margin the previous year, because all money above material, operating and overhead costs went straight thru as payroll (my income as one man shop)


    To follow up on my above post, my costs include materials and consumables, credit card fees and shipping (product out). It does NOT include my labor, or office supplies or software costs or capital expenditures, or electricity or tax guy, or cell phone or anything else considered overhead.

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    Quote Originally Posted by RedBaron View Post

    To follow up on my above post, my costs include materials and consumables, credit card fees and shipping (product out). It does NOT include my labor, or office supplies or software costs or capital expenditures, or electricity or tax guy, or cell phone or anything else considered overhead.
    Please explain why.

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    Quote Originally Posted by RedBaron View Post
    Right now, January 2nd, 2018, what was your margin ? Just a number please, should be able to pull this up off Quick Books or your Excel sheet in less than a minute. No BS about it depends on what I’m making, or my product is special, or I’m waiting for a big order to come in.


    Me: 55 %
    This may well be the stupidest fucking question I have ever seen asked on this site.

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    Quote Originally Posted by RedBaron View Post
    If you think of the McDonalds company, they know exactly what the gross margin is on any of their products, down to the fraction of a penny. A Big Mac is X cost for bun, burger, condiments, paper wrapper, etc, and the margin is the amount the customer pays beyond that. It does not take into account the pay of the McDonalds employees, the heating & cooling of the restaurant, the electricity for the lights, the grease in the fryer, or the interest paid for the burger machine, or the taxes, returns, call backs, waste, the CEO’s pay or the landscaping for the McDonalds corporate headquarters.
    Take a look at...Income Statement for McDonald's Corp (MCD) from Morningstar.com
    You will see you are wrong.

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    Decades ago, when the US had lots of manufacturing companies, the average profit margin after materials, depreciation, labor, tax, overhead, etc. etc.was about 5%. Those were the good old days.

    As others have noted, trying to figure profit margin on a sole proprietorship where you don't count your labor, any contributions to retirement, health care, etc. is pretty hard to compare. And the type of work, also as others have noted, changes things. A goldsmith might have a "margin" of 10% after materials cost, overhead, etc. and being doing very well.

    I do get your notion, though, of trying to figure a standard markup for the kind of work you do; whatever that is. I'd guess most sole proprietors do that by marking up the hours they estimate will go into a project -- and have that average out enough to pay the bills, feed the family, pay for healthcare, retirement, etc. And, then, check that their hourly labor rate (and productivity) are in the ballpark of their competitors.

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    Quote Originally Posted by wheelieking71 View Post
    This may well be the stupidest fucking question I have ever seen asked on this site.

    There's no such thing as a stupid question, just stupid fucking people..............like you.

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    Quote Originally Posted by Toolroomguy View Post
    Take a look at...Income Statement for McDonald's Corp (MCD) from Morningstar.com
    You will see you are wrong.
    Now you're just proving yourself pathetic.

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    If you want to get a feel for how well you did you can use google to get averages of what businesses in your size range brought in. A one man shop working his ass off might gross 200 grand I know some that do alot more than that but they are all cnc and very specialized. A shop with 5 or 6 people will probably bring in 600 grand a year maybe a bit more. The average is about a hundred grand plus per man. Most manufacturing businesses have lousy margins because the overhead is so high. Less than 6 percent of busineses in the united states gross over a million dollars a year. The average is 300 grand or less per year. Once you break a million the margins go down unless you are google and you are selling info then you make 53 percent margins and you are printing money.

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    This may well be the stupidest fucking question I have ever seen asked on this site.
    There's no such thing as a stupid question, just stupid fucking people..............like you.
    Now you're just proving yourself pathetic.
    Who said accounting was dull?

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    Thats a bit like asking......how much cash do you put in your pocket?........if a man in a suit is askin,you better check his ID tag before you answer........funny ,when I pay no tax,I must be cheatin,,,,,when a giant corporation pays no tax,.....thats minimization......and you cant minimize nuthin..........no,ya can.......a tax loss.

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    Lots of different takes on this as expected baser on OP question.

    The corporate guys can use many ways to take the same general data to make any point.

    But to keep things simple the OP just stated margin but did not specify what type.

    Single operators who have no outside labor costs need to pay themselves to calculate margin in the buisiness and if they ate not factoring an hourly labor cost as a buisiness expense it may or may not be good but that is between them and their tax folks.

    Back in past corporate life we had many numbers to meet and "key ratios" such as headcount to square footage were used as general indicators to help identify possible issues.

    The last thing that grunted was "operating margin" here all costs to operate the buisiness were added into a single total and total income from all sources as a second number then those were used to determine the margin and the happy number was 30% and we usually exceeded it until cellular wiped out land mobile.

    That may be what the op was after but some places that are "cost centers" ugh as powee plant maintenance sell time and services to parent company and a high margin may not be the optimum goal but that is only guessing.

    Sent from my SAMSUNG-SGH-I337Z using Tapatalk

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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.
    Well you asked a similar question awhile back: http://www.practicalmachinist.com/vb...income-302338/

    You seem somewhat obsessed with making up your own accounting rules. Using the rules you described I have an operation that runs approximately 97.2% margin. I'll let you feel super jealous about that number as you figure out why your accounting thought process is wrong.

    I would suggest that you take a post and explain how knowing the "redbaron margin" helps you make decisions in your business.

    For a sole prop, tell us how much an hour you made last year. If you want to get all fancy, tell us your average total capital investment in the business and subtract the lost opportunity cost of investing that money in an investment portfolio the past year.

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    I don't have the first effing clue. And to boot - I don't care. Frankly, I never have been very good at anything accounting related, despite my love of math. And, just as frankly, I don't have time to give a shite, either. I'm too busy to. That stuff is why we have an accountant. Last year? I do not care about that, either. I care about now, Six months from now, and One year from now. And tomorrow, I won't care about today. Again, as far as I'm concerned, it's the accountant's job to care about what's already happened. It's my job to work at getting where I want to be.

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    Quote Originally Posted by RedBaron View Post
    If you think of the McDonalds company, they know exactly what the gross margin is on any of their products, down to the fraction of a penny. A Big Mac is X cost for bun, burger, condiments, paper wrapper, etc, and the margin is the amount the customer pays beyond that. It does not take into account the pay of the McDonalds employees, the heating & cooling of the restaurant, the electricity for the lights, the grease in the fryer, or the interest paid for the burger machine, or the taxes, returns, call backs, waste, the CEO’s pay or the landscaping for the McDonalds corporate headquarters.
    All the products in the Big Mac would be under the heading "Cost of Good Sold" which are hard costs.

    I am reading that you take the selling price minus the hard costs and that leaves a gross margin? I think the correct term is gross profit. After deducting all overhead costs from the gross profits, you can figure out your net profits and hence your margins. McD's knows what the hard costs are, but the franchisee knows what he spends on overhead to make the gross profit which he subtracts from his net sales to figure his net profit.

    Gross profit is a dollar number, gross margin is a percentage

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    Quote Originally Posted by WILLEO6709 View Post
    does hopefully positive count?
    That was my thought, .only hope is fading fast Willie

    Seriously, personally I think it's a both a rude and intrusive question, IMO the only folk who need to know that are the business owners and investors, and most definitely not posted on line for the whole world to see.

    My stock answer to ''hows business Sami?'' and the like, from those who don't need to know, has always been ''fair to muddling''


    A thought what are the odds on the Op being a stooge for the IRS or some other money grabbing scamming bunch of bastards?

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    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!


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