Gross vs Net

By: Dan Kennedy on: January 7th, 2011 6 Comments

I read an authoritative article about a very, very famous “personal finance guru”, who grossed over $40-million in her business, but had less than $4-million left for herself. If I did $40-mill and kept only 10% of it, I’d shoot myself.

Another “guru” I know reportedly grossed twice that much, yet I happen to know for fact he had zero net, and is in hock up to his eyeballs.

Even Dr Atkins dove into Chapter 11 bankruptcy. I can only guess that lawsuits, settlements, infighting between the head doc and Dr. Atkins’ surviving family, all contributed. Still, there are millions of dollars of licensing fees and royalties flowing in; how can there be none left?

I work. But I stopped working for free a long, long time ago. I insist on profit, AND on gains in net worth/wealth as well, and I track and measure both constantly. I’m big on keeping score. I’m also very cognizant that big is rarely better, unless running a company up for sale or a public offering. At a certain point, dollars of gross added on cost proportionately more, and there’s less and less net with more and more gross.

Few people spend enough time analyzing, analyzing, analyzing what parts of their business…what products and services….what customers….what geographic territories….etc., etc., are most NET profitable vs. least net profitable. They let low profit stuff consume the same resources as high profit stuff. They justify continuing to feed what should be shot and put out of its misery.

They pee away money in overly fancy offices, addresses, staff and stuff to impress people without profitable purpose. The questions are: how does this contribute to NET? How much does this contribute to NET? All other benefits are fine ‘n dandy, as extras, not without net. Every justification I’ve ever heard for doing things with little or no net are b.s.

The Most Important Discipline

I have, in earlier times, ignored this, to my own pain and suffering. The rule is: pay yourself first. Take a pre-determined % of every dollar off the very, very top and move it away from your business, do not spend it, and place it in illiquid, untouchable, sound investments. If whatever you are doing will not support this, stop doing it immediately. A business is a thing to take wealth out of, not just have wealth locked up in.

You must not settle for whatever’s left over. Others get what’s left over after you are properly paid, and if the leftovers aren’t enough for the others, reduce staff, cut expenses, and if that won’t cut it, do the mercy killing now not later, and move on. You must not con yourself into nothing now for more later. If you can’t take at least 1% off the top now, there won’t be any later.

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    About The Author: Dan Kennedy
    Dan Kennedy is internationally recognized as the 'Millionaire Maker,' helping people in just about every category of business turn their ideas into fortunes. Dan's "No B.S." approach is refreshing amidst a world of small business marketing hype and enriches those who act on his advice. For more money-making marketing tips, tactics and strategies, go to www.GKIC.com

    6 Responses

    1. Coach Pete says:

      Great article Dan… Too many times we lose track of the most important thing in business…. True profits!

    2. Jillian says:

      Great article dan!

      I actually learned this lesson when I was up to my eyeballs in debt; it was a really small yet powerful shift when I started paying myself first, even if it was the smallest amount. Long story short, I dug myself out of a mountain of credit card debt and now have a NET worth!

      Over time, I began paying myself much more and the best result was that I feel much more powerful! I have options because I know that no matter how much money comes in, I am disciplined enough to keep it and grow it for the future.

      I teach my students this in my courses. And every single one of them has seen results.

      Thanks for spreading this powerful message!

    3. Shanda says:

      Fantastic article. I am going to send this to my followers..

    4. Marie says:

      Really great reminder of the purpose of business. Thanks Dan.

    5. Bad Financial advice seems to be the order of the day in Western society.
      It’s true what you say Dan, so true.

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