Accountants Profit Target (Monthly) Calculator
Estimate the monthly revenue an accounting practice needs to reach its target profit after regular overheads and variable costs.
Overview
Use this monthly profit target calculator to estimate the fee income an accounting practice needs to cover overheads, absorb variable delivery costs and achieve a chosen monthly profit. Add your current revenue and typical client fee to see the remaining gap in both cash and equivalent client numbers.
How it works
The calculator first finds your contribution margin by subtracting the variable cost percentage from 100%. It then divides your fixed costs plus desired profit by that margin. This estimates the revenue needed for variable costs, overheads and the profit target. The calculator compares this amount with current monthly revenue and expresses any gap as equivalent clients using your average monthly client fee.
How to use this calculator
- 1Enter the monthly profit your practice aims to make before business tax.
- 2Add recurring monthly overheads, including team costs and software.
- 3Estimate the percentage of revenue spent on variable delivery costs.
- 4Enter current average monthly fee income and your typical monthly client fee.
- 5Review the revenue target, shortfall and daily income target.
Example Calculation
Target monthly profit
$15,000
Monthly fixed costs
$30,000
Variable cost rate
20%
Current monthly revenue
$50,000
Average monthly client fee
$1,000
Working days per month
20
Required monthly revenue
$56,250
With a £15,000 monthly profit target, £30,000 of fixed costs and 20% variable costs, the practice needs about £56,250 in monthly revenue. Compared with £50,000 currently earned, this is a £6,250 gap, or about 6.3 equivalent clients paying £1,000 per month.
Frequently asked questions
What is a monthly profit target for an accounting practice?
It is the amount of profit the practice aims to retain in a typical month after operating costs and variable delivery costs have been paid.
What should be included in fixed costs?
Include recurring costs that do not usually change directly with each client, such as salaries, rent, core software, insurance, subscriptions and regular marketing.
What are variable costs for an accountant or accounting firm?
Variable costs can include subcontractor fees, client-specific software charges, payment processing fees, commissions and delivery costs that rise as revenue rises.
Why does the calculator use a variable cost rate?
A revenue target based only on fixed costs can understate the income required. The variable cost rate allows for the share of each additional pound or dollar of revenue that is spent delivering services.
How many new clients do I need to hit my profit target?
The calculator estimates equivalent clients by dividing the monthly revenue shortfall by your average monthly client fee. Actual client numbers will vary with pricing and service mix.
Does this include tax or owner drawings?
No. The target profit is treated as pre-tax business profit. Include any planned owner salary or drawings in costs if you want them reflected in the revenue target.
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Assumptions and warnings
Assumptions
- All figures are monthly averages and are entered in the same currency.
- Target profit is treated as profit before business tax, owner drawings and any items not included in fixed or variable costs.
- The variable cost rate is assumed to stay consistent as revenue changes.
- Current revenue and the average client fee are assumed to be representative of a normal month.
Warnings
- This calculator provides a business planning estimate only and is not accounting, tax or financial advice.
- Actual profitability can differ because of client churn, payment timing, bad debts, staffing changes and one-off costs.