Profit is not greedy. We’ve just been brainwashed to believe that. But, as a business owner, profit is what allows you to pay your team well, offer benefits, invest in better systems, and serve your clients at a higher level.
And yet, for many business owners, profit is the hardest financial to feel proud of. I mean, we all calculate it, and get excited by it, and then we reduce it to a number that we don’t feel guilty about so we can say “I’m not in it for the money”. You probably started your business from a place of care. You want to help people. You want to solve their problems. You want to make a difference in your community and in the world. But, when the care and desire to serve others becomes tangled with profit, there is an ick factor that many of us cannot untangle, and we continually operate our businesses at broke-even (making just enough to keep the doors open).
So you keep your prices reasonable. You stay affordable. You justify it by telling yourself that you are doing the right thing by taking care of your clients. You absorb costs instead of passing them through. You stretch yourself to make it work for your clients.
But over time, those decisions add up. The business grows, you hire employees, and the weight on your shoulders increases. From the outside, everything can look successful. On the inside, it feels tight. You are barely paying yourself or your team above minimum wage. Forget health benefits. When staff take vacation, your revenue dips dramatically.
Even though you are showing up for your clients, delivering value, and working hard, and busier than ever, your business is not supporting you in return. At some point, you have to ask yourself why it is acceptable for the business to survive, but not to thrive.
Inside The STOP Method™, a game changing budgeting method I created after almost 20 years as a business owner and mentor, profit is not treated as something left over at the end of the month. Profit is a KPI that is intentionally calculated and built into your numbers from the beginning, making it so you don’t feel guilty for the prices you charge because you understand the data behind the price points.
How to Calculate Your Profit
Your profit starts with your broke even number. I walk you through how to figure out what your “Broke Even” number is here:
Profitability Starts With COGS and Expenses KPI #1: Expenses
Why “Break Even” Keeps You Broke KPI #2: Broke Even
For any business, a 50 percent profit multiplier is a strong and healthy starting point. If you are highly specialized or positioned as an expert, you may find that a higher multiplier, such as 75 percent or even 100 percent, better reflects the value you provide.
If this feels WAAAAY too high for you, adjust as needed. I would not recommend ever going below a 15% profit multiplier though. Anything less than that, you will not be able to build cash reserves to keep your business afloat. And you will find yourself constantly needing loans and cash infusions to stay open.
This is not about following a rigid rule. It is about creating a business model that aligns with you for both your clients and your life. So find a profit multiplier that feels right for you and the clients you serve. Your profit multiplier is adjustable. You have the ability to choose a starting point and then increase it over time as your business grows.
The 50 percent profit multiplier is not simply excess income. It is what creates the cash flow needed to support your business properly. That profit feeds your four STOP bank accounts (Savings, Taxes, Operations, and Profit Sharing). It allows you to build reserves, support your team, and improve your service.
For my business, I use a 50 percent profit multiplier. It aligns with our pricing, supports our margins, and allows us to operate with confidence, knowing the ebbs and flows of revenue. It also allows me to live the life I want. I am able to provide for my team, my family, take the trips I want, and support my children’s future without financial stress.
It took me 20 years to get here, and I am proud of that. Financial freedom did not come easily. Often, I still think I am living in poverty, pretending that I have cash reserves for my businesses and family.
Stop Pricing Based on Competition
It is easy to look at what others are charging and assume that is where you should be. The problem with that approach is that it ignores your specific COGS and expenses costs, your level of expertise, and the experience and trust you deliver.
When you focus on competition, you often end up underpricing without realizing it. When you focus on your unique business and the value you provide, you create space to charge what your business actually needs to grow and sustain your employees and level of care. Plus, you find the clients that actually want to work with you and value you. That is crucial to running a business you love and feeling proud of your profit.
Profit Is Not Just Per Job Or Product
Another way you might find yourself calculating profit margins is per job or product. But, profit is not something that should be calculated on each individual job or product because it takes so much more to cover that job or product than you think it does. As in, there are a lot of hidden and soft costs that you don’t think about or feel you should apply.
When you attempt to assign profit at the job or product level only, it often overlooks the full cost of running your entire business and what it takes to keep your doors open. Administrative payroll, systems, subscriptions, and other overhead costs are rarely captured accurately in those calculations.
Some jobs and products will naturally have higher margins, while others will be tighter. When you price per job/product, many business owners find that there is not enough profit from the higher margin jobs to even cover their broke even number. This is why it is possible to have a record month in sales and still experience cash flow issues.
Final Thoughts From Your Favorite Accountant
You are not charging more just to make more. You are charging appropriately so your business can function, grow, and sustain the level of care you want to provide. You will be able to take care of your employees better, which in turn will take care of your clients better. And when everyone is taken care of better, you will feel a peace you never knew was possible.
That is not greedy. That is financial leadership.
If you are ready to build intentional profit into your business, here is how I can support you:
📊 Bookkeeping Services
💼 CFO Advisory
📘 Buy My Budgeting Book
Because at the end of the day, cash flow isn’t luck, it’s strategy.
