I've Got Revenue, But Where's The Profit?

Have you ever noticed that no matter how much money you make, you seem to be left with no cash-flow?

Or maybe you've had the experience of growing your business only to find that your profit margin is decreasing?

Too many small business owners are flying blind with no dashboard to let them know if they're heading in the right direction. 

Most people are taught that sales minus expenses equals profit. And if we use this formula, there are only two ways to increase profit. 

Improving your profit margin isn't a two dimensional formula; there's more than just what consistently comes in and goes out each month.

However, the difference between these numbers is directly related to how much or little a business owner will stress about cash-flow.

Few people are familiar with the real small business formula, which is profit equals revenue minus compensation plus operating expenses.

If you're in business, and you want to manage cash-flow, you need to make your 'in verses out' match to create your profit margin target. 

For instance, for every $100 of revenue that comes in, your profit is determined by how much goes to owners pay and operational expenses.

Imagine for yourself, for every $100 of revenue, you allocate $20 to profit, $20 to owners compensation and $60 to operational expenses. 

Many business owners assume they'll make their profit on the sale of the business and as a result put off important priorities until a future date.

Unfortunately, a lot can happen between now and that future date, or worse, that future date never comes and the owners are left unrewarded.

Whether you plan on selling your business or not, knowing your numbers can help you to increase the current and future value of your business. 

And with that, you can payoff your debts, make a deposit to your holding account and invest in things you care about knowing you've built a profit margin.

Learn more about cash-flow accounting or contact us today for your complimentary cash-flow analysis and tax-plan report