The Benchmarking team has over the years seen a consistent pattern observed in contractor industries. They have found that, as turnover increases, net profit margin tends to decrease. An even more interesting fact is that the net profit dollar per working owner increases, rather than decreasing with profit margins.
They explain this in terms of a smaller company with a higher profit margin (eg $250,000 with 10%) than a larger company (e.g. $1,000,000 with 5%), will still not have the same amount of profit available to its owners (in this example $25,000 versus $50,000).
One of the take home messages from this observation is that owners in larger companies have the ability to work less hours, whilst still earning the same net profit $ per owner as their smaller counterparts.
If you’re in the Contractor Industry and working long hours or not happy with the business performance, you may need to look at what your competitors are doing differently. One option is to Benchmark your business against industry peers, to boost net profit and understand what others are doing to work less and earn more.
There is a tool used by Savvy business owners, accountants and business advisory firms called the Benchmark Suite. It’s an independent online platform recommended by leading business professionals. To gain a competitive edge in your business, go to our “Business Owner” section on the homepage to find out more about the tool.