What’s a healthy net profit margin for a small owner-operator business with part-time employees?
I run a small home services company where I primarily work solo, bringing in part-time help for just 1-2 days a week. Currently, my net profit margin stands at 35%, but it jumps to 45% if I exclude costs for new tools and equipment, which I consider more of an investment than an expense.
My main expenses are clearly Cost of Goods Sold (COGS) and labor. I also notice my overhead tends to increase by about 5-8%.
I’m curious to hear what net profit margins other business owners are experiencing.
One response
A net profit margin of 35% is quite impressive for a small owner-operator business, especially in the home services sector. Many small businesses typically aim for a net profit margin between 10-20%, so your margins are well above average.
Excluding new tools and equipment as expenses can be somewhat common in this context, especially if you view them as long-term investments. However, keep in mind that for a full financial picture, it’s good practice to include these as part of your expenses when calculating net profit.
The fact that your largest expenses are COGS and labor is typical for home services companies. Maintaining a tight control on these costs while optimizing your labor hours will be key to sustaining or improving your margins.
Many small business owners see net profit margins ranging from 10% to 30%, depending on their industry, competition, and operational efficiency. If you’re comfortable sharing more about your business model or specific services, that could provide additional context for benchmarking against others in similar niches.
In any case, it seems like you’re doing a great job managing your costs and finances. Keep monitoring your expenses and consider reinvesting in growth opportunities to enhance your profitability even further!