To outlast your worthy rival in business, what's the sustainable profit margin?

"For by wise counsel thou shalt make thy way” (Proverbs 24:26, KJV).

Would you rather own the most profitable shop on the street, or the last one still open? A margin is a spare tyre. Nobody admires it on a sunny road, and everybody begs for it on a dark one.

By March 2026, the Controller of Budget's reports counted Sh465.87 billion in national and Sh156.84 billion in county pending bills, together totalling Sh622.71 billion.

Behind many of those shillings wait contractors and suppliers whose books may show profit while their bank balances show nothing.

 Profit that has not arrived is a promise, and promises do not pay wages.

This week's signal

A sustainable margin is not a trophy. It is the amount of bad luck you can afford. Net margin is what remains from each shilling of sales after every cost and tax.

In audited results, East African Breweries Ltd (EABL) earned Sh18.2 billion profit on Sh146.0 billion of net revenue in the year to June 2026, a 12.5 per cent margin, up from 9.5 per cent a year earlier.

 Safaricom earned an operating profit of Sh182.3 billion on service revenue of Sh400.8 billion, about 45 per cent, a rarity few firms enjoy.

A common rule of thumb: aim for 10 to 15 per cent net, and treat five per cent as thin, though it differs per industry.

But the number matters less than what it must survive. Here are your three business tests: The Friday test: will you afford to still pay salaries if your biggest customer pays three months late?

Imagine Sh100 million in yearly sales, with that customer worth one fifth. About Sh5 million is stuck. At a two per cent margin, you earn Sh2 million a year, so refilling that hole takes two and a half years. At 15 per cent, you earn Sh15 million, and it takes four months.

The rival test: will your business survive a price cut? Suppose you sell an item for Sh1,000 that costs you Sh900. A competitor drops to Sh920. If you match, your profit shrinks from Sh100 to Sh20.

A firm whose item costs Sh960 would lose Sh40 on every sale. In a price war, a thin margin does not merely hurt. It disqualifies you.

Many businesses are trapped in zero profit through continuous discounts that drive economic profit margins down to near zero. Cutting prices weakens your business's financial power.

The ruin test: can any single event end you? A company that earns well for nine years and vanishes in the tenth was never a good business with bad luck. It was a bad bet that won nine times.

What it means for business

EABL's year hints at how cash discipline feeds margin: lower finance costs, down about a quarter to Sh4.4 billion as debt fell, helped profit grow 49 per cent on sales growth of 13 per cent.

Safaricom shows what a cushion buys: its Kenyan profit stood behind continued investment in Ethiopia, which still loses money.

Foresight leadership means judging a decision by the quality of its thinking, not the luck of its outcome.

Test your business before the market does. Ask what would break us, and how many months we would last. Businesses that outlast rivals have foresight leaders.

What it means for policy

Late payment is a hidden tax on honest firms. The Controller of Budget found more than half of county arrears, Sh84 billion, older than three years. The National Treasury deserves credit for setting aside Sh68 billion in the 2026/27 budget for verified supplier bills.

Next, enforce the rule already written that puts eligible bills first in the next budget, and add cheaper short-term credit for suppliers waiting on public money.

An economy grows when good businesses fail only from bad ideas, never from bad timing.

What it means for people

Employees feel a cash squeeze long before the accounts admit it: frozen hiring, delayed salaries, allowances, sudden caution.

At home, your salary is your margin. Spend every shilling, and one hospital bill becomes your price war.

Afterthought

The builder counts his cost, and the king counts his soldiers. The wise counsel tells both the same hard truth: stop matching rivals shilling for shilling, because that only funds their growth, and instead find one thing your customers value the most and dominate it until price becomes a side conversation.

Ask your finance team two questions this week. How many days of cash do we hold, and what happens if our biggest customer is late?

The firms still standing in 10 years will be the ones that asked. "Decisions are made on the radar screen, but the future is yours."

-The author is a human-centred strategist and leadership columnist.