List of common business profit margins

Discussion in 'General Business Forum' started by PhilH, Jan 22, 2009.

  1. PhilH

    PhilH UKBF Newcomer Free Member

    Posts: 1 Likes: 0
    I am reasearching the market to find a suitable business opportunity. Not really having a clear idea of what type of business I want to start, I would like to research profit common profit margins to short-list my business types then reasearch my area for those existing types.

    Can anyone tell me is such a list of common profit margins exists? For example 'coffee shops 80% margin' I know it's only ball park but it would give me a head start to find some useable opportunities.

    Thanks

    Phil
    Posted: Jan 22, 2009 By: PhilH Member since: Jan 22, 2009
    #1
  2. Mister B

    Mister B UKBF Regular Free Member

    Posts: 2,309 Likes: 523
    Would you not be better off working out which business is best suited to you first? You may find an industry which offers margins of 80% but you might not have the skill set required to run the business in which case the margin is irrelevant.

    If I were you, I'd look at my strengths and find the business to match and go from there. Doesn't have to be something that you've done before, more a case of what you could, reallistically do in the future.

    Just my thoughts:)

    Mister B
    Posted: Jan 22, 2009 By: Mister B Member since: Aug 31, 2007
    #2
  3. SFD

    SFD UKBF Regular Free Member

    Posts: 1,323 Likes: 444
    I don't think you should be using that as a factor to start your business, not the main factor anyway.

    As a start-up with no trading history you may have to buy your stock at a price which gives you 20% mark up while more established companies are working on 60%.

    I think you should focus on an area where you have either knowledge, passion or contacts, and then focus on margins within that genre. :)
    Posted: Jan 22, 2009 By: SFD Member since: Nov 2, 2008
    #3
  4. JADEMEDIA

    JADEMEDIA UKBF Contributor Free Member

    Posts: 127 Likes: 22
    You can't possibly work on one high margin product and as far as coffee shops are concerned dozens of Starbucks shops are closing. I did some research on something this at uni however and it surprised me that whatever the business - whatever GP margin the net workded out very simillar.
    An office licence for instant can earn up to 40% on wine. 33% on beers and about 5% on cigarretes. In the end the net profit works out at - about 10% of turnover. The corner grocery store earns a GP of about 22.% across the board. The net however works out the same.
    Another thing that surprised me and it was confirmed later by friends who got jobs with the orgs but both HMRC and Customs & Excise work on those guidlines. That means that if an off licence for instance started earning 40% it would probably set the bells ringing about money laundering. And finally a fact I am sure that you all know small businesses are far more productive and profitable than big buisiness. Most big business for example don't look for huge profits as such but a return on capital. Typically anything from 5% - 8%.

    Imagine any small biz working on that basis like investing £100,000 in cash to earn £160 a week. Jade
    Last edited: Jan 22, 2009
    Posted: Jan 22, 2009 By: JADEMEDIA Member since: Jan 1, 2009
    #4
  5. KidsBeeHappy

    KidsBeeHappy UKBF Regular Full Member

    Posts: 7,357 Likes: 1,580
    What Jademedia says is true and not surprising.

    If you have a high margin profit, eg Jewellery has a mark up of around 300% GP, the other side of the coin is that you maybe only make a sale two or three times a week, so your overheads per sale are high proportionately - you can't just open the shop for the 2 hours that it takes to sell those two products each week, you need to pay rent, rates, electricity, wages and all the other gumpf for every hour that you are selling nothing.

    If you're talking about services, then 100% profits are easily attainable, as what are selling is time & knowledge, not costs of sale, but what you do have is very high overheads in delivering those services to the client.

    This is not the way to work out which business to start.
    Posted: Jan 22, 2009 By: KidsBeeHappy Member since: Oct 9, 2007
    #5
  6. dsigner

    dsigner UKBF Regular Free Member

    Posts: 375 Likes: 54
    There is a useful consideration about margins once you have decided on a business are using the some of the sensible criteria mentioned above. If you have researched a sector and think that it normally runs at 8% then put a lot of effort into achieving 9%. Trouble is a new business normally will be only getting 6% because all the costs are stacked against you with a small starting turnover. It can be done though and that one percent will get you through the bad times and really pay off come the good times.

    It doesn't matter what the actual percentages are. It is the difference which counts. Just don't cheat yourself by fiddling the figures. You must compare exactly the same way.
    Posted: Jan 22, 2009 By: dsigner Member since: Jun 6, 2008
    #6
  7. silklink

    silklink UKBF Regular Free Member

    Posts: 348 Likes: 42
    Adding to Boxby's views, it really depends what braod sector you are in. In general, high turnover returns less profit, while lower turnover tends to yield higher profit. Think of the difference between a supermarket (product) and a firm of consultants (service).

    Surely though, it all depends on your abilities. You can't be a high earning consultant if you don't have the wealth of experience and competence any more than you can be a supermarket manager without the same.
    Posted: Jan 22, 2009 By: silklink Member since: Sep 19, 2008
    #7
  8. JTSystems

    JTSystems UKBF Regular Free Member

    Posts: 148 Likes: 24
    Profit vs Item cost in IT is anywhere from -% (Yes a lot of company sell at a loss) to around 20% for more niche, slower moving products.

    There are some outrageous profit margins on low value items (But what's a pound or two to the average customer on a pot of thermal paste?)

    I'd stay clear of the IT market if your looking for low run rates high margin and quick turn over.

    IT is great if you add value, but then you need to consider your time as a cost and work the margins out.

    Time is often a margin that isn't considered.

    Is it worth selling 1 products at £10,000 with 10% margin (£1,000) if you only sell one a year?

    Cut your self a wage of £20,000 and you can easily see this isn't effective.

    You need a range of products, which will often range in profit margins, you need some fast low margin items, bundled with some slow high margin products, and you may just stumble across a fast mover high margin item - then you a re onto a winner.
    Posted: Jan 22, 2009 By: JTSystems Member since: Apr 15, 2006
    #8
  9. profitxchange

    profitxchange UKBF Regular Free Member

    Posts: 1,494 Likes: 157
    would agree with all that has gone before. Many business sectors have wide ranging NPBT margins. I have been involved in engineering co's that or loss making or just floating whilst others with a 50 year history are making 30%!!
    Likewise IT lots of bottom feeders just about breaking even whilst again I have experience of at least on that is around 75% npbt on £4m sales.

    You can make better margins by positioning yourself such that you are perceived as good value for money and thus command higher prices for what may be a pretty standard product. This takes innovative thinking and mingling in the right maket.
    Posted: Jan 22, 2009 By: profitxchange Member since: Apr 16, 2005
    #9
  10. edmondscommerce

    edmondscommerce Magento + PHP Expert Full Member - Verified Business

    Posts: 3,470 Likes: 597
    interesting thread :)
    Posted: Jan 22, 2009 By: edmondscommerce Member since: Nov 11, 2008
    #10
  11. RobertG

    RobertG UKBF Regular Free Member

    Posts: 261 Likes: 44
    Here are a few examples of the gross profit margins from different businesses:

    Leisure & HotelsInternational AirlineManufacturerRetailerDiscount AirlineRefiningPizza RestaurantsAccounting SoftwareGross profit9.64%5.62%35.14%11.41%27.46%11.99%47.52%89.55%

    But you can see that you cannot choose a business based on GP. What are you qualified to do. Where is your expertise?
    Posted: Jan 22, 2009 By: RobertG Member since: Jun 27, 2008
    #11
  12. BusinessIdeas

    BusinessIdeas UKBF Regular Full Member

    Posts: 2,948 Likes: 245
    Its not just profit margins that should be taken into consideration, but also how hard you have to work to achieve your profits. In our loan business we make around 25% to 30% of turnover. However as you can imagine our turnover is quite substantial. Luckily we dont have to worry about VAT because it doesnt apply to loans.
    Posted: Jan 22, 2009 By: BusinessIdeas Member since: Aug 23, 2006
    #12
  13. stugster

    stugster UKBF Regular Free Member

    Posts: 9,294 Likes: 2,061
    Was it not the CEO of Vodafone that said: "Text messaging is the closest thing to pure profit"?
    Posted: Jan 22, 2009 By: stugster Member since: Feb 1, 2007
    #13