Profit Range

There's quite a lot that goes into pricing for your services. The simpler your operation, the simpler the equation. One factor in the equation should be profit. What is a fair profit range, do you think?

Hi Libby. I see you and I raise you. ;^) How many TF-ers identify profit--or its first cousin, overhead--in the price they quote as their hourly rate? I suspect that number is often set by deciding on the "locall going rate" and adjusting slightly, then maybe(!) adding a 3% cost of living increase onto that.

The idea that there should be a discrete number (percentage, lump sum or however) that represents profit is one that many people forget about. I've found that this is especially true for people who start their independent accidentally, the ones who start a business because they have so much freelance work, or those who sit through the first part of a "how to open your business" program and then drop it because it seems boring or irrelevant.

Though last year, I had a client who has been in business for more than 30 years but couldn't identify the p&o in his rates.

For those of you who've never thought about this, a couple of hints: It's a rule of thumb in restaurants that the cost of the food you sell should never be more than 1/3 the price of the dishes you serve. In some places, that number may be 1/4 or 1/5. And even at that rate (which would include both p&o, of course) most restaurant owners lose money for the first 8-10 years if they last that long.

The "literature" indicates 10-30 percent "should" be factored in, but often isn't. (Thus far I've made ten times more than I've invested.) I figured out how to do that by........asking lots of questions! Thanks for your perspective.....

Hello, I am new here. I really don't know why you guys get all worked up because Libby is asking a lot of questions. Actually that helps a lot because the answers he gets are read by other forum users that could have the same questions.

So Libby, the 10-30% is working out for you?

Anyway, have a great day everyone!!!!

And Kylan---my business is small and simple with little overhead. I make sure I deliver and get paid. I don't take on more than I can do a good job on. It hasn't been a lot of money, but it has all been profit. As I gain more insight I expect to progress.

I would never consider 10-30% to be a good profit margin. Unless you are selling really expensive items or it's a commodity that people MUST buy, those figures are far too low. I recommend at least 50% as a profit margin, with 100% or higher most of the time.

Originally Posted by herewego I would never consider 10-30% to be a good profit margin. Unless you are selling really expensive items or it's a commodity that people MUST buy, those figures are far too low. I recommend at least 50% as a profit margin, with 100% or higher most of the time.

That is quite impossible. Even low cost operations still have to have office space, insurance, internet access, computers, subscriptions, marketing, webhosting, training and various other office supplies.

Over a 100% profit margin would require you to net more after taxes than you grossed. Perhaps you are talking about markup?