Every business owner who’s either starting or running a business probably instinctively knows what the ‘breakeven point’ means.
This is the point at which you’re neither making nor losing pre-tax profit, and you’re coming out neutral.
But here’s the thing…
By the time most businesses find themselves at the breakeven point, their business is usually already dead.
So, your goal shouldn’t be to just breakeven and then hope to make a little profit on top…
You actually want to get well clear of the breakeven point, which is why we refer to a 10% pre-tax profit margin as the new breakeven!
This is because when it comes to pre-tax profit, we’ve found that:
5% or less in pre-tax profit means your business is on life support.
10% in pre-tax profit means you have an okay business.
15% or more in pre-tax profit means you have a great business.
So, if you aren’t at least achieving a 10% pre-tax profit margin (your new breakeven) then you’re in the danger zone and need to rethink how you’re running your company.
Above breaking even, we recommend that you aim for a 15%+ pre-tax profit margin.
So, say you’ve hit $1,000,000 in revenue, this means you should really be aiming to generate $150,000 or higher in pre-tax profit.
If you can achieve a 15% or higher pre-tax profit margin then you can rest easy knowing that you have a healthy and profitable business.
If you're an electrician, plumber, painter, carpenter, or any other trade business owner who is looking to take their business to the next level, click here to learn more about how our team can help!