Bwahaaa your business profits knowledge is a bit limited. I'm sorry, I'm not insulting you, I just find it very comical when people who have never owned a business know what the margins are. I know we are all rich, lol.I agree with the associated costs, but as it's a small plumbing business he runs, all his costs (tools, vehicle, a home office, gas, etc. can be claimed. Then you can write down some of those annually. Guys who run their own businesses, and have been in it long enough to have covered all those costs are laughing. At this point nearly every cent is income. Being able to claim fuel, maintenance, tool purchases, home office costs lowers his tax bill substantially.
That's the one thing I appreciate about small towns. If you're a shitty contractor, everyone knows it, but that also means the guys who do quality work can charge a premium. My folks had one guy build a deck for them 20 years ago, the thing didn't last more than 7 years. It was solid construction, but boards too close meant rotting, and it wasn't quality work. The next guy that did it was more expensive, but he knew his shit. I took pictures every phase of the build. Not sure if I still have them, but I recall enough that I could figure it out. This guy was booked a year in advance for all sorts of projects. It's like anything, if you are really good at what you do you are in demand.
-25% off the top is the governments on any profit you make.
-Then there is his yearly license fee.
-Being written off, doesn't mean the government gives him the money back, only saves the tax on that item so 25% tax saved. You still pay the full amount minus the gst, depending on if your gst collection is higher than your payout then you get no gst return.
-Vehicle insurance
-vehicle maintenance
-consumables used on the job site
-gas
And I could go on and on.
My is very profitable and I have long paid for my equipment and not every cent is income. Fuck I wish, I'd be a millionaire, multiple times over by now.
A good business makes anywhere 12-30% net profit. You are really doing good if you are closer to the 30%. Vast majority make 15%. Majority of small business owner do not make 6 figures. Most are around $65,000. Plus a car and other little bonuses. SO maybe 90,000 take home at the end. Its not until you start doing multiple million dollar sales that you start to make some decent profit.
So if your buddy does 500,000 a year in sales, if he is the only employee then 75,000 would be his take home pay, give or take. Now this is all dependant on how cutthroat he was to get jobs and so on. Some jobs you do well, some you make very little and some you get stiffed on.
Now I'm just guessing, but I know like 20 business owners and am part of a group where we get together drink beer and talk about business and my numbers are pretty much on the money from when I talk to others about how their profits are.