Contracting VS Small Businesses

[bizways net]

I have been thinking about this recently. To get 150 000 / Year in small business i.e wit employees etc , you would need an yearly turnover of about 1 Mil assuming your personal profit is about 10 % which is quite good as far as i think. Sure it is hard to get a 150 000 / year contract but so can be reaching 1 Mil in sales. So contracting all the way then ?

[craig1]

I have been thinking about this recently. To get 150 000 / Year in small business i.e wit employees etc , you would need an yearly turnover of about 1 Mil assuming your personal profit is about 10 % which is quite good as far as i think. Sure it is hard to get a 150 000 / year contract but so can be reaching 1 Mil in sales. So contracting all the way then ?

No, not necessarily. Businesses such as consultancy or professional services can easily run at 50-80% profit and still be price competitive, the bigger they get though the harder it is to maintain that due to needing non-earning support staff. That said, the sales/marketing bit of small business always eats into earning capacity.

I do consultancy work occasionally and I regularly make 80%-90%+ net profit on the bits of work, all depending on location and inclusive of counting the non-earning sales time allocated of each piece of work. As a consultant, I can easily charge £1000-1500 per day on certain bits of work, if they got me in as a contractor they'd grumble at going over £500.

[bizways net]

No, not necessarily. Businesses such as consultancy or professional services can easily run at 50-80% profit and still be price competitive, the bigger they get though the harder it is to maintain that due to needing non-earning support staff. That said, the sales/marketing bit of small business always eats into earning capacity.

I do consultancy work occasionally and I regularly make 80%-90%+ net profit on the bits of work, all depending on location and inclusive of counting the non-earning sales time allocated of each piece of work. As a consultant, I can easily charge £1000-1500 per day on certain bits of work, if they got me in as a contractor they'd grumble at going over £500.

Yes , the business venture I am comparing to will not have the ability to get 80 % of the profits. Instead all turnover will be distributed like this : 80 % for labor costs , 10 % marketing and IT and hopefully 10 % for me. It is a lot of work for those 10 % ... I think is much more than reading tech books 3 hrs a day.

It just made me renew my respect for contractor remuneration . It makes lots of effort to get good money in. Also like one of the members mentioned here before... in some lucky contract you may be just sitting on your arse and wait the money come in...

[ratewhore]

Yes , the business venture I am comparing to will not have the ability to get 80 % of the profits. Instead all turnover will be distributed like this : 80 % for labor costs , 10 % marketing and IT and hopefully 10 % for me. It is a lot of work for those 10 % ... I think is much more than reading tech books 3 hrs a day.

It just made me renew my respect for contractor remuneration . It makes lots of effort to get good money in. Also like one of the members mentioned here before... in some lucky contract you may be just sitting on your arse and wait the money come in...

That's the difference between owner operator and manager run businesses...

[craig1]

Yes , the business venture I am comparing to will not have the ability to get 80 % of the profits. Instead all turnover will be distributed like this : 80 % for labor costs , 10 % marketing and IT and hopefully 10 % for me. It is a lot of work for those 10 % ... I think is much more than reading tech books 3 hrs a day.

It just made me renew my respect for contractor remuneration . It makes lots of effort to get good money in. Also like one of the members mentioned here before... in some lucky contract you may be just sitting on your arse and wait the money come in...

Again, I disagree. Some of the big city law firms with £1bn+ turnover are on 50%+ profit margins. Freshfields for example with 52% profit on £1.1bn turnover. Compare that with Tesco that has a roughly 4%-5% net profit margin. It's the industry that's relevant, not how many staff you employ or how much money your company turns over.

If you're in a professional services industry then 10% net profit is a bit stingy and should make you wonder why you'd bother. If you're in a manufacturing industry then 10% net profit would make you a market leader in most of those industry sectors!

[d000hg]

10% profit is real low. Even agencies make that, if you're directly supplying and directing people then you need enough to factor employee payments, do marketing & R&D, AND have money for the non-chargeable employees like the MD, secretary, IT guy, etc.