01:09
Faizan
Confused about why your gross profit is high but your net profit is low?
When the ladies get them they look real. But when guys get spray tans they look like Magda's twin brother from the movie "There's Something About Mary." Spray tans last about 7 to 12 days. So if you are into this stuff, you have to go every 1 to 2 weeks. That's a lot of tanning, and that's a recurring fixed expense for you. Maybe that's where all of your money goes.
Do you ever ask yourself: Where does all of the money go? Why do I feel like I have no money?
You are killing it in your business, right? You are bringing in the business. You think you are making good money. But every month when you look at your net profit then at your business bank account, there isn't much cash in there.
Every business owner spends money in 2 areas:
• The money you spend to produce/provide a service or product, which is costs of goods sold.
• The money you spend to keep your business up and running, which is called overhead.
Stay with me here. You really need to understand this. It's so key to getting a handle on your business money. You will have more clarity. You will feel more in control. You could go to the moon! Seriously.
OK, here is an example...
Let's say you are an event planner and you are planning a business conference for Apple. Your fee is $100,000. You will supply and pay for event production, flowers, tables, chairs, catering, and staff. You plan on all of the expenses costing $70,000. So you plan on making $30,000, or 30% profit. The $30,000 is called your gross profit.
When the ladies get them they look real. But when guys get spray tans they look like Magda's twin brother from the movie "There's Something About Mary." Spray tans last about 7 to 12 days. So if you are into this stuff, you have to go every 1 to 2 weeks. That's a lot of tanning, and that's a recurring fixed expense for you. Maybe that's where all of your money goes.
Do you ever ask yourself: Where does all of the money go? Why do I feel like I have no money?
You are killing it in your business, right? You are bringing in the business. You think you are making good money. But every month when you look at your net profit then at your business bank account, there isn't much cash in there.
Every business owner spends money in 2 areas:
• The money you spend to produce/provide a service or product, which is costs of goods sold.
• The money you spend to keep your business up and running, which is called overhead.
Stay with me here. You really need to understand this. It's so key to getting a handle on your business money. You will have more clarity. You will feel more in control. You could go to the moon! Seriously.
OK, here is an example...
Let's say you are an event planner and you are planning a business conference for Apple. Your fee is $100,000. You will supply and pay for event production, flowers, tables, chairs, catering, and staff. You plan on all of the expenses costing $70,000. So you plan on making $30,000, or 30% profit. The $30,000 is called your gross profit.
Posted in: business
