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Guest LLHarlow

TPA Profit Margin

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Guest LLHarlow

I am interested in determining a reasonable expectation of an attainable net (pre tax) profit margin for a non producing third party administration firm with fewer than 500 clients. The firm is in Ohio with clients primarily in Ohio and neighboring states. For example, on revenue of $500,000, is it reasonable to expect 10%, 15% or 25% after all expenses including salaries (EBITDA) ?

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Can't really compare profit margins without defining owners' compensation and benefits/perks. Need to assign some "reasonable" value for this based on the work the owners do as employees. Once you do this, then 20% should be a minimum target. If not at least this much, why take on the headaches and the risk?

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Guest LLHarlow

I need to determine a rate of return as though owners are not employees. My principals, who are not involved in the daily operation of the organization, are setting a budget based (I believe) on an unreasonable profit goal. I believe our business has a rather skinny margin but I want to poll other managers and owners for opinions.

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