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A Small Profit Margin Can Be Huge

Dec 22nd, 2009 by Afiya

Tuesday, December 22, 2009

Many entrepreneurs will turn down an opportunity because the profit margin may seem to be too small. Sometimes, this may be a good reason to walk away. Other times, it may be a reason to jump on board. In many scenarios, a small profit margin can be huge.

Believe it or not, but many Fortune 500 companies have small profit margins. It’s quite common for a major corporation to generate a billion dollars in revenue and net only 20% or 200 million.

Many would say that 20% is too low, but they are focusing more on the fact that 80% of their revenue is lost. First off, the 80% is not lost. It takes money to make money, and the 20% that is left over is still substantial.

Even if your company generated a 10% profit margin, it can still be worth your while. For instance, if your company generated $1 million in revenue at a 10% margin rate you still walk away with $100,000 in profits.

That may sound significantly less, but it’s a whole lot more profits than most companies ever see.

Remember too that what you pay yourself on payroll can be included amongst your expenses. So your personal income is a surplus to what the company nets, which technically raises a 10% profit margin into 15% or 20% - depending on your personal salary.

About Dante Lee

Dante Lee is the 27-year old president and CEO of Diversity City Media, an African American marketing and public relations firm based in Columbus, Ohio. Founded in the year 2000, this award-winning company helps corporations and organizations reach African American consumers through online advertising and unique PR strategies. They are best known as the creators of BlackNews.com, BlackStudents.com, BlackPR.com, BlackExperts.com, and BlackSpeakers.com
Lee is also co-founder of Lee Moss Media, a joint venture with his long-time business partner William Moss of Moss Interactive. This media powerhouse produces a series of social networks including HBCUconnect.com, BlackWomenConnect.com, BlackHistory.com, BlackInAmerica.com, BlackAuthorsConnect.com, BlackCEOs.com, and others. Collectively, their sites attract over 2 million African American visitors each month.