I'm seeing posts on here every day talking about Revenue. Revenue is the top line of an income statement that shows how much money your business took in (sales, essentially).

You need Revenue to make money... but you need MARGINS to KEEP money.

For example:

I paid my landscapers 20k to do my back yard (That is 20k REVENUE for them).

The job cost them 10k (Supplies, labor, liability, subcontractors, etc).

They will profit $10k (20k price less 10k expenses).... That means their margin is 50%... which is okay (but it depends on industry).

A typical small farmer in the midwest will have revenue of about $1.2 Million dollars... (Holy shit farmers are rich whoda thunk?) --- Not so quick.

Their expenses for machinery, seed, livestock, barn repairs, vet bills, etc will probably come out to $1.1M dollars.... so even though people would gush at their revenue... their net income (or profit) is only $100,000...Mind you... For A LOT of hard work, early mornings, sleepless nights, rain dances, etc.

When you're starting a business or have an existing business you need to focus on margins and net profit. You can do this two ways:

-Increase Revenue (sales/income).

-Decrease Expenses (Cut costs).

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99% of the time I push for more revenue (especially when you're just starting) as that shows your product/service is actually worth purchasing. Seeing your sales go up every year means that people find value in your product/service and because of that typically more people will... They just don't know about it yet... In comes marketing!

Increasing revenue usually means increasing expenses (marketing costs, hiring people, buying a building, etc.).

During this time focus on your margins... If revenue increases $100k but your recurring expenses increase $120k; You're doing it wrong. It'll get top heavy, bloated, and cave in on itself.

Whenever I take on a new expense I want to make sure that expense either helps cut down on another expense (hiring a VA from the Phillipines as opposed to a full time 40 hour staff here, as an example) or that it increases revenue.... Say hiring a salesman on commission... if he brings in $150k and I pay him $100k... That'll work. I just may go out and get 3 more sales people.

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What to do with with your profit:

This is where people mess up most often. They'll buy trinkets or show off with a leased Mercedes that's a depreciation turd and/or buy $800 bottles of vodka at a night club. Dumb.

Others will use it to pay recurring expenses (rent, mortgage, phone bill, insurance etc.). This is fine.. But there is a better way.

Once you get disposable income (money above and beyond your basic needs) It is time to start buying ASSETS.

Assets are those that appreciate in value and produce cash flow. This can be real estate, buying another business, stocks, bonds, etc.

Start small. Let's say you want your assets to buy you one Subway sandwich per month ($10). Don't focus on making an extra ten dollars... focus on accumulating an asset or two that produces $10/month.

Let's say it's a dividend stock paying 5%.... well:

$10/month x 12 months =$120/year divided by the dividend rate of 5% = $2400.

That sounds like an expensive sandwich but you would be missing the point. Having a goal of making $2400 will push you forward moreso than making a measly $10. Furthermore... That $2400 produces income and appreciates over time... to pay you that same $10/month without lifting a finger ever again.

Take this basic principal and scale up:

1. Enough to buy a subway sandwich ($10)
2. Enough to pay your cell phone bill ($100)
3. Enough to pay your car payment and insurance ($500)
4. Enough to pay your mortgage ($2500)

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Once you have enough ASSETS to generate enough CASH FLOW to cover your expenses... You are now independently wealthy. With astute management you can hang up your cleats and have a margarita on the beach in Mexico (Paid for by your assets).

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Note: This is simplified and not including taxes, depreciation, amortization, hidden assets, private equity, etc...

Own your business like a business. Don't be a stripper making 250k a year in cash and 10 years later have zero to show for it. Honestly if strippers knew this formula and weren't caught up in the game of showing off shit to people they don't know on TikTok; they could be independently wealthy in 10 years. Perhaps I should make a course for pimps on financial management.

Before we point fingers at strippers mismanagement of cash flow realize that any business or entrepreneur can be equally guilty. It's the same thing. Spending more money than you make and/or never buying assets. It's like being a hamster on a wheel with no way off. Soon the wheel goes faster than you can run and it starts tossing you around. When this happens you begin to mismanage your business and/or sell of any assets that you may have purchased before.

This is more prudent than ever with where we are in the economy and market right now.

Remember this: In a recession... Money doesn't disappear... It simply changes hands.

Assets will be on sale my friends... Will you have cash to scoop them up?

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