Dynamic Digital Marketing

Chapter 7Calculate your ideal sales revenue

‘Business must be run at a profit, else it will die. But when anyone tries to run a business solely for profit, then also the business must die, for it no longer has a reason for existence.’

Henry Ford, Ford Motor company founder

What's a good profit margin for a business?

Many new business owners believe you should expect to have a lower profit margin in the beginning. Of course, it depends on your field – but, in most cases, that's surprisingly not true. In the service and manufacturing industries, profit margins decrease as sales increase. The reason for that is simple. Businesses in these sectors may see a 40% margin until they hit around £250 000 in annual sales. That's about the time when the business has to start hiring more people.

According to an article by Investopedia, each employee in a small business drives the margins lower. One study found that 90% of all service and manufacturing businesses with more than £500 000 in gross sales are operating at under 10% margins, when 15% to 20% are likely ideal.

Marketing as a revenue generator – the maths of selling

A common misperception is that marketing is a cost to a business, when in fact your marketing should be a revenue generator.

It is a difficult shift to get your mind round – switching marketing as a cost centre to marketing as a revenue generator – as its normally associated with the sale of products and services, not the vehicle used to achieve the sale.

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