Setting the Profit Target

When I work with clients on bonuses, we don’t just say,

“the practice needs to be profitable.”

That’s not specific enough.

We have to decide what profitable actually means for this practice.

With one practice owner, we went back and looked at multiple quarters of data.

Not one good month.

Not one strong stretch.

A real pattern.

Then we asked a very simple question:

At what profit margin does this business actually work?

Meaning:

The team is paid.

The owner is paid.

Taxes are planned for.

Seasonality doesn’t cause panic.

And there’s still margin left.

For that practice, the answer was 30%.

So that became the target.

Not a goal.

A requirement.

At that margin, the practice could operate without everything feeling tight.

Below that, things started competing.

Owner pay got squeezed.

Cash felt stressed.

There was less room to make decisions.

So 30% became the profit criteria.

Not because it’s a magic number.

But because it reflected what this business needed to be healthy.

That’s how we use profit in these conversations.

As a decision-making line.

Once that line is clear,

everything else gets easier.

Including bonuses.