[raydan]

In Bart's defense, Dino... he's right and you're wrong.

The definition of profit margin is "net profit margin".

[dino_bobba_renno]

raydan raydan:

In Bart's defense, Dino... he's right and you're wrong.

The definition of profit margin is "net profit margin".

Net refers to how much is left after reinvestment, bonuses, dividends....etc

Why would you even bother being in busines if you only made 3 to 5 percent when you could easily take the same money and make upwards of 2.5 percent by just having it sit in a bank account? Or 7 to 8 percent in investments (which is a very conservative and realistic return)?

[raydan]

profit margin = Earnings before Interest and Tax / Revenue

This is what Bart was talking about for grocery stores and Walmart's.

Businesses that have a high volume of sales (compared to inventory) and where inventory turns very quickly typically have a very low profit margin. They rely on volume.

EDIT: I have to add that these businesses also usually have a very low gross profit margin and mark-up.

[dino_bobba_renno]

raydan raydan:

profit margin = Earnings before Interest and Tax / Revenue

This is what Bart was talking about for grocery stores and Walmart's.

Businesses that have a high volume of sales (compared to inventory) and where inventory turns very quickly typically have a very low profit margin. They rely on volume.

Again, I'll post anouther link:

http://finapps.forbes.com/finapps/jsp/finance/compinfo/Ratios.jsp?tkr=SWY

It's right there in black and white. You wouldn't be in busines for 1.1%.

You tell me, if you had a million dollars and someone said "hey lets start a company and we'll make 1.1% profit" what would you say?

[raydan]

Bart was talking about profit margin (net profit margin), and so was I.
On your link, it's 2.1%, close to what he was talking about.

So, you've lost me.

Note: they don't specifically give profit-margin, but Pre-Tax Profit Margin is close enough.

[raydan]

And to answer your question, Dino, it depends.

Investing 1$ million to make 1.1% on 10$ million sales is stupid.
Investing 1$ million to make 1.1% on 10$ billion sales is smart.

[dino_bobba_renno]

raydan raydan:

Bart was talking about profit margin (net profit margin), and so was I.
On your link, it's 2.1%, close to what he was talking about.

So, you've lost me.

Note: they don't specifically give profit-margin, but Pre-Tax Profit Margin is close enough.

They do in the Forbs article which reports on 2010. 1.1% (5 year average). Go up to your boss on Monday and ask him if he would be in business for that percentage. He'll laugh you out of his office.

[dino_bobba_renno]

raydan raydan:

And to answer your question, Dino, it depends.

Investing 1$ million to make 1.1% on 10$ million sales is stupid.
Investing 1$ million to make 1.1% on 10$ billion sales is smart.

No it's not smart because to do 10 billion you have to spend 10 billion, you have to buy the materials for what your going to sell and pay for the labour costs long before you ever see a return on that invvestment. That means you have to carry that money and the bank will charge you more in interest than you'll make unless you have a that money in pocket.

I'm all ready in a position where I'm thinking of selling because I'm down to 10%. Simply put I can make more doing something else.

[DerbyX]

dino_bobba_renno dino_bobba_renno:

raydan raydan:

And to answer your question, Dino, it depends.

Investing 1$ million to make 1.1% on 10$ million sales is stupid.
Investing 1$ million to make 1.1% on 10$ billion sales is smart.

No it's not smart because to do 10 billion you have to spend 10 billion, There are costs for materials, labour, insurance etc... That means you have to carry that money and the bank will charge you more in interest than you'll make unless you have a that money in pocket.

I'm all ready in a position where I'm thinking of selling because I'm down to 10%. Simply put I can make more doing something else.

Going to give being a professional gigolo a try?

[raydan]

I'm not arguing with you Dino...

High volume retail businesses pretty much ALL have very low net profit margins.
I'm lazy and I'm not going to search this but I'd be surprised that any large grocery store, Costco, Wall-Mart, Canadian Tire etc. would have a net of over 5%, probably like you say between 1 and 2%.

What are you selling/type of business?

[dino_bobba_renno]

DerbyX DerbyX:

Going to give being a professional gigolo a try?

I thought about that but my wife tells me we would go broke

[DerbyX]

dino_bobba_renno dino_bobba_renno:

DerbyX DerbyX:

Going to give being a professional gigolo a try?

I thought about that but my wife tells me we would go broke

So she didn't marry you for money or looks eh?

[dino_bobba_renno]

raydan raydan:

I'm not arguing with you Dino...

High volume retail businesses pretty much ALL have very low net profit margins.
I'm lazy and I'm not going to search this but I'd be surprised that any large grocery store, Costco, Wall-Mart, Canadian Tire etc. would have a net of over 5%, probably like you say between 1 and 2%.

What are you selling/type of business?

Maybe I'm using the wrong termanology here. Let me put it this way:

You're average loaf of bread is what? $2 or so. Do you honestly believe Safeways mark up is only 2 cents?

It's not, it's more like 20 to 30 percent. That's your gross profit before they pay for trucking, wages, insurance ...... what your left with is net profit which is 1.1%. That's what I'm talking about when I say no one is in business for less than 20%.

[Brenda]

I pay almost $5 for a loaf of flax
If they would only make $0.05 on that, they are doing something wrong

[raydan]

dino_bobba_renno dino_bobba_renno:

raydan raydan:

I'm not arguing with you Dino...

High volume retail businesses pretty much ALL have very low net profit margins.
I'm lazy and I'm not going to search this but I'd be surprised that any large grocery store, Costco, Wall-Mart, Canadian Tire etc. would have a net of over 5%, probably like you say between 1 and 2%.

What are you selling/type of business?

Maybe I'm using the wrong termanology here. Let me put it this way:

You're average loaf of bread is what? $2 or so. Do you honestly believe Safeways mark up is only 2 cents?

No, but mark-up is closer to "gross profit margin", not "net profit margin".