A self-employed food business owner: from 25-30% margins to 10%

For every 100 euros invoiced, the self-employed worker keeps 10

A business in the food sector, 20 years in the trade, good sales last financial year and a bank account that drops every month. Its owner doesn't think it will survive the winter and doesn't rule out closing before March. He keeps 10% of every product he sells; in 2019 that margin was around 25-30%. The difference isn't in sales: it's in everything that leaks along the way.

The list of items is well known and long: the self-employed contribution, IVA (Spanish VAT) at 21%, corporate tax, electricity, transport, purchases of raw materials, search and social media advertising, accountancy, mobile phone, internet and machinery. With that split, drawing a salary of 1.000 euros requires a turnover that, according to his account, many small businesses don't reach even in their best year. Sales can be good and profit non-existent.

Why a 10% margin doesn't cover the mortgage

The case isn't isolated. A small hotel in the Pyrenees, open for five years, does its sums like this: of every 100 euros for a room, Booking takes 20% in commission, IVA another 10% and corporate tax 23 or 24%. If you add marketing, wages and social security contributions, electricity, fuel, laundry, purchases and amenities, profit falls below 10%. It doesn't cover the mortgage, by its own calculation.

There's a comparison that is even more disconcerting, also attributed to him: a rental property that isn't declared keeps the 70% of those same 100 euros. A business that invoices and pays taxes competes on price with another that doesn't go through the till. The customer pays the same. What changes is what's left inside.

IVA isn't the business owner's, but it's managed as if it were

The role of IVA concentrates one of the most repeated arguments. One camp maintains that the 21% isn't a business cost: it is passed on to the customer and paid to Hacienda (Spain's tax agency), so it shouldn't affect the margin. The objection comes on the price side: if the market won't accept a higher price tag, the tax eats the margin from below. You sell less or earn less, and the self-employed worker ends up acting as an unpaid tax collector on behalf of the state, without being paid for it.

One participant's calculation: of every 100 euros invoiced, 21 go in IVA and 22 in IRPF (Spain's income tax); after fuel and materials, around 10 remain. Another everyday example mentioned in the thread: a renovation to change a shower tray and a toilet, with a tile trim included, 400 euros in labour and the builders at his house at three in the afternoon.

Paying 600 euros a month with no unemployment benefit or paid holidays

The structure of labour costs comes fully into the equation. A self-employed worker with one or two employees pays around 600 euros a month to the Seguridad Social (Spain's social security system), according to the case detailed in the conversation. In return he has no contributory unemployment benefit: if the business collapses, there is no unemployment pay. From the other side, the response is that it is a benefit you don't contribute to and that non-contributory aid exists for situations of extreme need.

The Swiss case is cited as a reference, where the self-employed worker would not pay IVA until exceeding 100.000 euros in turnover. It is an example raised in the conversation, with doubts about its accuracy, and not a fact verified here. What is verified is the effect of rising prices: inflation squeezes the margin of those who cannot pass it all on.

The final twist: from margin to grievance

As the messages go on, the matter shifts from the balance sheet to a comparison between ways of life. One side argues that the problem isn't taxation, but that there are activities that are no longer profitable and that those who keep them going should retrain, as an employee does when their sector dies. The response is that there are trades with months of work ahead and that a lack of succession isn't a lack of demand.

The comparison with public employment comes up again and again. It is argued, in a tone of grievance, that a public worker earns around 1.700 euros a month without taking on the risk of the activity, and the reply comes just as quickly: if the job is so comfortable, let them sit the public exam. The exchange heats up, but the fact that closes it, according to those taking part, doesn't change: employees don't balance their own books either.

Closing also costs

There remains a detail that explains why many businesses with no margin stay open: pulling down the shutter has its own price. Most can't leave because they are in debt and cling to the hope that next year will be better. Add to that the bureaucracy: paperwork and taxes also when closing down.

The calculation that closes the comparison is that of the competitor who doesn't declare: 70 euros free out of every 100, against the 10 of the one who invoices everything. As long as that difference remains, arguing about margins is of little use. And that, exactly, is where the analysis gets stuck.