Simple Numbers, Straight Talk, Big Profits!

The “Four Keys” to Profitability

To address the most commonly recurring problems in business, entrepreneurs should learn to manage the four keys to profitability: “the owner’s salary, profit, labor productivity” and “business physics.”

Key 1: The Owner’s Salary

As an entrepreneur, pay yourself a fair market-based salary. Otherwise, your net income figures will be inaccurate, which will distort your financial picture. Your taxes are one of the best indicators of your company’s financial growth. The more tax you pay, the more profit you have earned. If you paid no tax, you either lied to the Internal Revenue Service (IRS) or made no money. Instead of fixating on how much you owe in taxes, focus on building your business, and the numbers will follow.

Check salary websites such as the Economic Research Institute’s salary survey assessor (erieri.com) or Salary.com to learn appropriate compensation levels for your industry. If you can’t afford to pay yourself what you’re worth, you’re creating “sweat equity” instead. Pay your employees a fair salary. If you pay them below average wages, they won’t stay for long. Hire with care. Constantly hiring and training...