Setting a Path to Maximum Profitability
To understand where you are and where you need to go to truly influence the bottom line requires an up-to-the-minute knowledge of your financials. It also requires a financial plan that leverages that data for profitability and growth.
SECTION 6 OF 7
Desired Net Profit
Now, you know what rate it takes so you don’t lose money, but how much should you charge for labor so your company makes a profit? Figuring out that direct labor rate begins with determining your desired net profit.
Net profit equals your profit divided by total sales. For service companies, 25 percent is considered a good starting point. You can adjust to 30 percent or higher as you continue to grow the business.