Have you ever wanted to know if there is a certain benchmark percentage of profit you should be hitting?
The answer to this question is yes, absolutely.
You’re in business to turn a profit. Unless you’re a charity organization, you absolutely should be setting benchmarks in your business for profitability.
Where that benchmark should be is really determined on where your company is right now financially. If let’s say you’re losing money every month, and there’s a lot of businesses out there that are, the first benchmark I suggest you hit is break even. That doesn’t sound fantastic but when you’re losing money every month, break even starts to feel pretty darn good.
Once you’re in the black, start to set a profit benchmark in incremental stages. It’s very difficult to go from, “I’m breaking even” to 20 or 30% bottom line profitability, and in fact it’s setting the bar so high you’re pretty much setting yourself up for failure. What I recommend is slowly, over time, start to move that benchmark a little bit at a time. Maybe you set an initial profitability benchmark of 3%, and then increment that every quarter by 1%, so every quarter you’re always building that benchmark.
Over time you of course want to hit the highest benchmark that you’re capable of hitting in your business, without sacrificing quality.
I say this because I never want to help a business owner create a business which isn’t really good for the end user. We don’t want to sacrifice too much quality or too much service, so it’s finding the magic zone in your business where you can still deliver a quality product, quality service, and still turn a healthy profit at the end of the day. That benchmark could be anywhere from 5% to 20%, a little higher, maybe a little lower, you’ll need to find the right number for your business, and the more you dive into it, the more you look at it, you’ll know what that number is.
But without doubt, just take it in stages depending on where you’re at in the business. It’s the best way to approach it and to set yourself up for long-term success.
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