Greg Crabtree, Beverly Herzog
Learn more about moneyandinvestments with this collection
The importance of innovation
The power of perseverance
How to think big and take risks
Pretax Profit = Total Sales – (COGS + Operating Expense + Interest Expense)
Gross Profit = Revenue – COGS
Do NOT include direct labor costs in cost of goods sold.
Cost of goods sold typically includes pass-through costs like finished goods, materials, and subcontractors.
By focusing on gross profit instead of revenue, most businesses from any industry can be compared side to side.
Contribution Margin = Gross Profit – Direct Labor
The “black hole” exists between the $1 million and $5 million in revenue.
This is a time in your business growth when you’re forced to add staffing and infrastructure before you can really afford to.
One of the keys to success is continually upgrading your staff.
The need to add management infrastructure seems to naturally occur when you have about twenty employees typically, when you’re between $2 million and $3.5 million in revenue.
Opportunity is missed by most people because it is dressed in overalls and looks like work.
Least understood and least measured form of capital (yet it’s the most common!)
If you can’t afford to pay yourself a market-based wage for your efforts, then you’re going to have to defer payment and work for it.
The trap that most people fall into is believing that because they have a low wage, they can live off the profits of the business. It’s better to live off your savings and let your sweat equity build capital in your business. Then pay yourself a market-based wage when your business reaches 2 or 3 percent pretax profit.
Keep your reporting simple while still being able to recognize a flashing red light that indicates a problem.
The more frequently you look at a report, the less data it should contain.
There are five basic elements that combine to drive the profits that are used to establish the value of your business: customers, employees, processes and know-how, core capital, and intellectual property.
Profitability, salary cap management, and the four forces of cash flow are all contained these five elements of value.
#3. PROCESS AND KNOW-HOW
#4. CORE CAPITAL
#5. INTELLECTUAL PROPERTY
Medical sales representative
This book teaches the fundamentals of owner compensation, profit targets, labour productivity, cash flow, and data reporting. Clear explanations and helpful illustrations throughout make it a must-read guide for small business owners looking to achieve higher profits.
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