What is a fair profit? Let’s say you were in business for yourself. You were a skilled carpenter doing high-end cabinetry work. You received a job building new cabinets for a kitchen. You estimate your time and the cost of all supplies to complete the job plus your cost of doing business; equipment, various insurance, payroll for your assistant, etc.
You bid $20,000 for the job. What is the net before tax profit you expect to put in your pocket?
Well if you were an electric utility, that profit would be about $1,400 to $2,000. If you were a water utility it would be $2,480 and if you were a railroad it would be $3,560.
But if you were a health insurance company that amount would be on average $600 to $1,000 and occasionally $1,400.
Given the political rhetoric about premiums and outrageous profits, you may be inclined to believe that health insurers are raking in the cash. But if you were betting your retirement on growth in stock value, which you probably are, which industry would you invest in?
Here are the profit margins by industry so you can compare.