Ryan VaughnCOO of Incite Tax & Accounting. Ask me anything about your taxes.

What is a Healthy Net Income? | Incite tax | The 3.3 Rule

10 Jun 2025 · 1 min

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In this concise financial advisory segment, the speaker defines what constitutes a healthy net‑income margin for a business and why it matters. A net‑income percentage of 20 % or higher is presented as the ideal target; margins between 10 % and 20 % are acceptable but not optimal, while 10 % or lower signal a risky, stressed‑out operation with tight cash flow and unclear profitability. The speaker introduces the “Forbes‑Ramsey spectrum” and positions the “3.3 zone” as the sweet spot where profit goals and employee considerations are balanced. To move toward a healthier margin, two levers are described: a “bigger shovel” (growing revenue through new streams, market‑based pricing, or better positioning) and a “smaller hole” (cutting unnecessary expenses). The key decision test for expenses is whether they help acquire or retain a client; if not, they should be eliminated. Listeners are directed to Chapter 7 of the source material and the website 33rule.com for deeper guidance.

Chapters

If you're 10% or lower, you don't have a healthy business. You're at risk. You're probably pretty stressed out. Cash flow is super tight. We don't know what our net income is. You got to know that number. What is your net income percentage? The goal we're looking for is more than 20%. Between 10% and 20%, not bad, but it's not quite 20%. That's what we're shooting for. Ways to improve this. All about profit and all about people on both ends of this, what I call Forbes-Ramsey spectrum, is not a place we want to be. We want to be in the middle, which is the 3.3 zone. We have to make decisions, of course, for the profitability of the business, but we also need to make decisions that keep our team in mind. We either need a bigger shovel, which could relate to new revenue streams, looking at a market comparison, maybe you're not charging enough for what you're offering, or is there any way I can make a hole smaller? That would be the expense side. So the bigger shovel is related to looking at your income, smaller hole side is looking at expenses. Ask yourself, does this expense help me get a client or keep a client? And if it doesn't, then we need to cut it. Learn more in chapter 7 or at 33rule.com.