If revenue is up and the owner’s share is not, it is busier. Growth is more money left over at the end of the year for the same amount of your life. Busy is more motion. The two look identical from inside, because in a busy year everybody is working, invoices are going out and nobody has any reason to look. Volume hides sin.
The year that ran a million six and finished two thousand dollars behind
The founder of Summit built a forecast in February for the last year he ran a delivery and logistics company. Thirteen routes on one contract. Revenue, one million six hundred and fifty-four thousand dollars. Paid out to the contractors who ran the routes, one million one hundred and forty-two thousand. That left a route-level gross profit of five hundred and eleven thousand, thirty-one percent of revenue, which is the healthy-looking number most owners stop at.
Then the overhead: leases, the manager, dispatch around the clock, spare equipment, maintenance, insurance, interest on the line. Four hundred and thirty-nine thousand eight hundred. Forecast profit, seventy-one thousand six hundred. Four point three percent. The other shareholder’s distribution, four and a half percent of gross: seventy-three thousand six hundred and eighty-seven. Remainder to the man who owned it: minus two thousand and seventy-six dollars.
Trucks moving every day. Customers served. A million six in revenue. And the owner finishing the year behind. Every one of those numbers was knowable in advance.
The part that should worry you
The routes were not all bad. Their returns ranged from seventeen percent to eighty-four percent over contractor cost. Parts of that business worked beautifully. He simply could not see which parts, because the total looked fine and the volume kept the total looking fine. The problem is almost never that a business does not work. It is that the owner cannot see which parts of it do.
Growth on cheap contracts is not growth. It is the same year again with more people in it.
Try this
Put your last eight quarters on one page: volume, revenue, profit. Three lines. Then mark where your attention went in each one. It followed volume. And your best revenue quarter is probably not your best margin quarter.
See where the money actually goes
The Profit and Cash model walks your own figures from revenue down to what lands in the bank, and shows the gap. Free, no sign-up.
Read Volume Hides Sin, the free guide →
More questions owners ask
- Why is my business profitable but I never have cash?
- What would I free up if customers paid me 30 days sooner?
- Which part of my business should I fix first?
- Why do I keep hiring for the same job?
- What should a small business measure every week?
- How do I know if a customer is costing me money?
- Why does every decision still come back to me?