There is a misconception by many team members that every dollar you take in goes into the owner’s pocket. The reality that most business owners know is that revenue does not equate to or become profit. Some who work for us don’t understand the reality of running a business, and some business owners don’t understand how to run a business or create a real profit.
We must teach our people ‘Where the Money Goes’. There is a great podcast episode with shop owner Patrick McHugh, HERE. You will find a four-page download handout that you can use in presentations to your people, or go to our DOWNLOADS page to find it along with other important documents. Many misconceptions exist among employees that all the money earned flows directly into the owner’s pocket.
Patrick and I shared our passion for teaching our people/team about the profit or loss statement or ‘Where the Money Goes.’ Costs like wages, real estate taxes, lease/mortgage, utilities, benefits, fees, insurance, maintenance, training, marketing, subscriptions, and systems, among others, absorb the gross profit made on the sale. The net result is profit before Uncle Sam’s taxes.
Sharing the fundamentals of managing Net Profit is vital. Profit is not a dirty word. Every business must make a profit; if not, you’ve just got a hobby. To the degree that owners make a strong profit, the company can survive or strive. It should be something everyone strives for. It allows new equipment, wage increases, business expansion, emergency funds, and security.
I think of Business by the Numbers Podcast with CPA Hunt Demarest. Hunt is on our Aftermarket Radio Network, and he helps shop owners better grasp their finances and money disciplines.
Please learn as much as you can to manage your expenses, know industry benchmarks, and review your gross profit margins because all costs are paid from the gross profit you generate.
Don’t forget to go to our classroom page on the website to see a group of episodes on this specific topic.