Home Landscape Contractor Free Lanscape Contractor Business Plan 8.7 Operating Profit Margin Analysis
8.7 Operating Profit Margin Analysis
The Operating Profit Margin for a small business like Green Lawn Landscaping is the Operating Income divided by the sales of the business. In the world small business the earnings before income and taxes is used as the operating income. This ratio computes how much money the business has left over to pay for the interest on its loans and taxes and it gives small business owners like Frank & Peter the ability to explain to the reader of the business plan just what kind of cushion the business has to pay its creditors.
In this analysis we can see that the operating margin will be 24.9%, 26.2% and 27.5% of total sales which are projected to be $295k, $337k and $387k in the years 2016, 2017 and 2018 respectively. What this means in simple English is that of every dollar earned in 2016, 75 cents will towards the payment of interest, taxes and the rest to the firms' bottom line. These margins of course can be easily affected if costs were to increase resulting in higher operating expenses andtherefore lower the operating margin. Alternatively sales could come in higher than projected and that could improve these ratios if costs remainedthe same. Operating income is currently projected to be $73,469, $88,384 and $106,244 in 2016, 2017 & 2018 respectively.
Quick Links:
- Go to the Corresponding Template section for this industry.
- Go to the Corresponding Questionnaire section for this industry.
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