Loading summary
Transcript3 lines
- [00:01]
A
Have you ever said, I made money this year but I don't know where it went? Or worse, on paper I'm profitable, but my bank account says otherwise. Well, today we're going to expose the four biggest profit lies in business. And if you don't understand these, you will always feel broke no matter how much revenue you do.
- [00:19]
B
Today's episode is brought to you by Yardbook, the All in one CRM for your lawn care business. And as an exclusive partner of this podcast, you can get started today and begin simplifying your business and maximizing your profit. Sign up now@yardbook.com the link is in. The show notes. Time now for Profits with Paycheck, an essential podcast for you in the green industry who are looking to unlock the full potential of your business. Hosted by John Pajak, your certified financial coach, the show features in depth discussions with successful entrepreneurs, thought leaders and industry experts. Providing practical advice and proven strategies on financial planning, operations, marketing and sales. Profits with Paycheck has valuable insights and action steps that you can implement today for creating long term success. Now, here's John Pajak.
- [01:22]
A
Welcome to Profits with Pajak, the podcast where we talk about business strategies and financial insights for the green industry. I'm your host, John Pajak and today we're breaking down something that every business owner thinks they understand and but few actually do. And we're talking about profit. And not just profit, but the different types of profit and the lies that come with them. Because if you don't understand this, you'll be chasing the wrong numbers, making bad decisions and staying stuck. So here's the, here's the issue. You know, there is confusion around profit. It's a very simple word. But most unit, most business owners, they use the word profit like it means only one thing. But there are multiple versions of profit. You've got gross profit, your net income, EBITDA and cash flow. And each one tells a completely different story. And what's the problem? If you focus on the wrong one, you could be working harder than ever and still losing. So here are like the four profit lies. And line number one is my gross profit looks great, so I'm good. Well, gross profit is simply your revenue minus your cogs, your cost of goods sold. You know, the minus. It's, it's the direct cost to perform the work. Okay, it sounds simple, right? But here's where guys get it wrong. They look at strong margins and think, I'm crushing it. Meanwhile, they might not be looking a little bit deeper and looking past that number and realizing that Their overhead is bloated, that equipment is draining cash. Their marketing is inefficient. And gross profit doesn't mean that you're profitable. It means you've created the opportunity to be profitable. So if your gross profit is bad, you don't have a business. But if your gross profit is good, you still might not have a truly profitable business. And line number two, your net income says that you're profitable. Well, net income is what's left after, okay? All your expenses are accounted for. You know, you've paid your taxes, all the things, right? And this is the number most people point to and say, see, I made money. You know, some of them don't actually even account for the taxes. They, they just see that, hey, we made some money, and then they forget, Uncle Sam's got his hand out saying, I need, I need that, son. You know, you better open up that wallet, fork some cash over into this big palm right here, otherwise you're going to prison. But, you know, here's the problem. The net income includes things like, you know, depreciation and accrual timing, non cash expenses, you know, so you can show a profit and still not have money. And when you look at it, you know, your net income is your report card, but it is not your bank account. Lie number three is ebitda, means that I'm making money now. Ebitda, it stands, it's E, B, I, T, D, A. Okay. People say it differently than I do, but it's okay. Earnings before interest, taxes, depreciation and amortization. Ebitda. That sounds fancy. And it is. And the thing is, you know, to calculate that, there are some people that will point you to calculators and things like that that will show you what your EBITDA is. But it's mainly used for investors, buyers and banks, which, I mean, that's not a bad thing. But here's the danger. People treat their EBITDA like it's real money and it's not. It ignores the equipment purchases, the loan repayments, the money, the real cash, the real cash that's leaving your business. And when we really look at ebitda, it's what your business looks like to someone who doesn't have to live in it. So this is like more for investors that maybe want to buy your business, okay? And line number four, if I'm profitable, I will have cash. And this is the most dangerous one. You know, you can be profitable on paper. You could be growing and you could be doing everything right, and you could still go broke. Why? Because cash flow is timing. You know, when the money comes in, when the money goes out. If those don't match, you're in trouble. So at this point, you know, profit is actually theory when cash is the reality. So here's how you fix this. You know, you. You stop chasing profit as a single number, and you start understanding the system. And this is exactly why I teach budgets break evens of bottom lines. Because your break even controls your gross profit, your budget controls your spending, and your bottom line becomes predictable. That's where the profits are. You know the bottom line. When you know your numbers, you price with confidence and you sell with clarity. And you stop guessing. And most importantly, you stop feeling broke while doing big revenue. So, you know, just real quick, you know, some of you might be thinking, you know, hey, paycheck. You know, you're. You're the budget. Break even the bottom lines guy. You know, why are you being critical about this profit here? And it's. It's not that I'm knocking them. They're essential. But here's what I see when a business. Excuse me, When I tell a business owner to operate within a budget, they feel restricted. And in my world, the budget doesn't restrict you. It gives you permission to spend. It gives you clarity. And if you really want to understand your numbers, you know, I just recommend heading over to johnpajak.com and check out budgets break evens, and bottom lines. But the big thing is when you start to get confused between the gross profits, the net income, your ebitda, and the cash flow. When. When you don't have clarity on those things, even though you could still show that you're. You're profitable and you could actually still see it in your. In your bank account, it. It's not as refined, you know what I mean? Could literally be like a big chunk of clay, right? You just dug up some clay, slapped it on a plate. It's like, yes, here we go. This is. This is wonderful, right? But it's not. It's not as much as. It's not worth as much as if you were to take that clay, that big old chunk of clay, maybe put it on a spinning wheel and craft a vase out of it. You know, you remember that movie Ghost where you know, you had Patrick Swayze and Demi Moore and he, you know, not to ruin the plot line, but it's been like 40 years. But, you know, she. Patrick Swayze passes away and, you know, this other stuff, but he, you know, he's behind her and sculpting the clay and whatever. Anyway, I've been weird, but anyway, the thing is, it's like that big chunk of clay isn't, as word, isn't worth as much in its raw form. And you could have raw profits, but you could have a much better, more amazing clarity and, you know, higher end profits and everything. When you sculpt that lump of clay into something beautiful, you have to refine it. And that's where I'm getting at with this. Back when I was getting my lawn care business off the ground, I was juggling routes, invoices, and customer notes with paper and prayers. It was chaos. Until I found yardbook. Yardbook gave me the structure. It helped me track chemicals, route efficiently, invoice faster, and most importantly, it helped me grow a profitable business. If you're tired of duct taping your systems Together, go to yardbook.com and sign up for free. And if you're ready to go premium, use promo code paycheck to get your first 30 days on me. So regardless of, you know, where you're at right now, there's three steps that you could take that I'm going to share with you, that you can, that will help you. And hopefully you've already done these things and I'm just kind of preaching to the choir. But if not, I hope that, you know, these three things can help you and turn your this next season into a truly profitable, truly profitable season for you. So the first one is know your job costs. Because if you don't know your cost per hour or per property, you're just guessing at your gross profit. Number two is stop trusting net income alone. Okay? Compare your net, your net income to your actual cash in the bank. They don't match. Figure out why. And number three, track your cash weekly, not monthly. This is a huge one, okay? Some guys, they don't even do a quarterly. They might just do it at the end of the season. And that is not a very wise thing to do. You know, you got to keep your finger on the pulse. I know you're busy with actually operating and doing the work so that you get the cash coming in, but you have to track these things. And I find that tracking your cash weekly is really one of the most efficient ways to find out whether you're making money or not. Because, you know, cash problems, they don't always show up in your p. L. Like, over time. It's like if you. If you sit on that number, you looking at it, you could watch it like a hawk, whether it's going up or down and not get muddled. You know, the waters get muddied when you have like an entire season of numbers you got to sift through and, you know, you need to have visibility right now, not later. It's hard. It's easy to see a fish in clear water. It's like, oh yeah, there's a pike over there. I want that pike. You know, get your polarized glasses and everything. You can see kind of through the water, the reflection on the water and everything. But you know, if it's really muddy water, it's like, oh, you're just fishing blind. You know, you don't know what your your target is. You don't know where to throw the bait. You know, nice chunky spinner bait getting thrown up underneath them, you know, weeping willows and stuff. You know, that's where the fish like to hang out. But again, you know, forgive my analogies, but you know, your visit you need to see right now where your cash flows is not down the line here. So let's bring it home. Your gross profit tells you if your work makes money. Your net income tells you if your business makes money, your cash flow tells you if you should stay in business. And your EBITDA tells someone else what your business is worth. So if you're, if you've ever been confused about your numbers, you're not alone. But now you don't have an excuse. So this week, pick one job, break it down. What did it bring in? What did it cost? What did you actually keep? And if you can't answer that, that's where you start. So I hope that you have enjoyed this episode. As always, God Bless. Keep pushing through and we'll catch you on the next one. Thank you once again for listening. If you've enjoyed the show, please leave a review and share it with fellow business owners. Your support means the world to me and helps keep the show going strong. I want to give a special shout out to our friends at Yardbook. Their continued support has been instrumental in bringing this podcast to you week after week. If you haven't checked them out yet, visit yardbook.com and see how they can give you the tools to streamline and manage your lawn care business. Also, don't forget to explore the resources and upcoming events that I've collected to just for you in the show Notes. These are curated to help you stay ahead in your business with the latest tips, tools and networking opportunities. Whether it's a new tool, an insightful article, or an event you don't want to miss, I've got you covered. Until next time. Keep pushing through and God bless. Sam.