The general public massively overestimates the profit margins businesses actually make (UK Study)
Posted by Anen-o-me@reddit | Libertarian | View on Reddit | 20 comments
Socialism feeds on this popular economic illusion. People see all this money coming on, they don't see the expenses draining it out an assume owners are pocketing far more than they actually do.
Worker salary is on average 30%-35% of business expenses, business owner profit after expenses might be a tenth of that if they're lucky.
Many businesses make a loss all year long until Christmas.
Chorkla@reddit
“Companies increased their prices, it's not inflation, it's just that companies are greedy bad guys" ~average person
Swaga_Dagger@reddit
Its because people don't understand how profit margins work. It is kind of irrelevant. They just feel like they are being ripped off at the gas station, electricity prices ect.
You can still be ripped off at a profit margin of 0% or getting a fair deal on a profit margin of 15%
kilometr@reddit
A gas station by me posted years ago, how they actually make less money when gas prices go up. Customers are less likely to buy anything in the convenience store if they’re paying more for gas. That’s where they make their better margins at.
vNerdNeck@reddit
doesn't shock me in the slightest. Folks don't understand margins at all. They just see big numbers and thing companies are making that much.
idontagreewitu@reddit
Yep, people frequently misconstrue revenue as profit.
paulversoning@reddit
Now add us pharma companies
Anen-o-me@reddit (OP)
Government granted monopolies change the equation.
Cowrekted@reddit
How is rail transport higher than hospitality on the estimation?? I knew people were uninformed but not at this level.
jimmy_leonard1@reddit
They do.
AlphaTangoFoxtrt@reddit
Not just the UK, everywhere. People think restaurant owners are rolling in dough but profit margins are generally razor thin, made up for by volume.
Rozdolna@reddit
Doesn't this just show the British public is illiterate in general on this stuff since they think the NHS makes money?
Ya_Boi_Konzon@reddit
Nah, that's the one thing they're right about in this image
Anen-o-me@reddit (OP)
It's the same in the USA.
Ya_Boi_Konzon@reddit
It's like 50% if you include the fraud
Last_Construction455@reddit
Every time gas goes up all I hear about is greedy oil companies!
Adventurous_Focus994@reddit
Why wouldn't the companies just put their money in a mutual fund if they get 5-10%... I think that's what some of those average...?
dpidcoe@reddit
They do invest it, just generally they invest it back into themselves. Say a company spends 50m to build a batch of widgets that they then sell for 100m. That's 50m in the bank, which they then allocate to pay employees, benefits, interest on loans, and other kinds of operating costs. Say they've got 25m after that's all said and done, which they then invest 20m into making more tooling to expand the widget factory. Now their profit for the year was only 5m, but the company is set to ramp up to 150m worth of widgets/year by the next year, and the company will now be worth that much more if they get bought out by somebody else (or go bankrupt and have to sell their tooling).
thatrocketnerd@reddit
I mean these companies make up the mutual funds so the average company definitionally would do about as well investing in themselves as they would investing in mutual funds.
LostInMyADD@reddit
What is used to create the metrics? I'm sure there is hidden revenue and made up losses.
Jericho311@reddit
Feels meaningless. The public is annoyed about pay inequality and "wealth" largely measured on unrealized gains from stocks ( IE: Musk and Bezos) neither of these concerns will be captured by profit margins. Even if you are able to correct the publics understanding of the profit margins, their view of that wealth disparity will remain because the wealth optics will remain the same.