What is a healthy profit margin for small business?

Small businesses need to make a profit in order to produce positive cash flow. Without profit, your business is just a hobby!

But how much profit is enough to run your small business? What should we be shooting for when it comes to an ideal profit margin?

This video gives specific targets for service-based small business owners.

0:00 Labor efficiency ratio
0:19 What should your profit % be?
1:04 Profit percentage minimum
1:35 Profit percentage calculation
1:50 Why 15% minimum?
2:30 Hobby or business?
3:50 New breakeven
4:12 Argument for 20%
4:50 LER and profit margin
6:35 Profit tolerance
7:05 Improve profit margin
8:08 Share your numbers

Mentioned in this video:
Interview with Greg Crabtree:    • Interview with Simple Numbers Straight Tal...  
Podcast with Greg Crabtree:    • Keeping It Simple With Greg Crabtree  
Simple Numbers Book: https://www.claracfo.com/simplenumbers

To learn more about CFO services for B2B services providers making over $1M in annual revenue, go to: https://claracfo.com/services

Here are some of the tools I trust and recommend to help you manage your business finances more effectively. These are affiliate links, which means I may earn a small commission if you use them—at no extra cost to you. Thank you for supporting the Clara CFO channel!

🔢 QuickBooks Online – 30% Off for 12 Months plus 30-day Free Trial
https://claracfo.com/QBO
Get organized with the most popular small business accounting software.

🏦 Relay Bank – Get a $100 Bonus
https://www.claracfo.com/relay
Modern banking designed for business owners. Sign up and deposit $100 to claim your bonus.

👥 Gusto Payroll – Earn $100
https://claracfo.com/gusto
Run payroll and receive a $100 reward—perfect for growing teams.

💰 Monarch Money – Extended 30-Day Free Trial
https://claracfo.com/monarch
Smart personal finance software for entrepreneurs and families.

📊 RC Reports – Get $50 Off a Compensation Report
https://claracfo.com/RCReports
Ensure your S-Corp salary is IRS-compliant with a professional comp report.

Hannah Smolinski is a #CPA and the Founder of Clara CFO Group. Find out more about Clara CFO Group at https://claracfo.com/


Disclaimer: This video is intended for educational purposes and should not be taken as legal or tax advice. You should consult with your financial professionals about your unique financial situation before acting on anything discussed in these videos. Clara CFO Group, LLC is providing educational content to help small business owners become more aware of certain issues and topics, but we cannot give blanket advice to a broad audience.

CODE: MB015N9HUSUDCHC