Today’s guest host is Michael King, CEO of KFE Solutions and fellow podcaster of the show called In the Trenches.
Michael is often asked what the number one mistake is that business owners make when it comes to their finances. That’s a pretty easy question for Michael to answer. He believes the biggest mistake made from the newest of entrepreneurs to CEOs of large corporations is not knowing the four most important metrics of their business. They are: revenue, gross profit, net profit, and cash.
Revenue is the total of your sales from your product or service. Most everyone knows and tracks revenue. Next is gross profit. An example is if you sold coffee cups for $1, and you bought those cups for $0.20 from your supplier. Your gross profit would be $0.80. Net profit is then your gross profit (in this case $0.80), minus overhead costs (say that is $0.30 per cup). That leaves you with a net profit of $0.50 per cup sold. These are all important numbers to know but at the end of the day the most important number is cash.
Cash is actual money in the bank. It is what pays salaries, vendors, and everything else. It is the one tangible number out of the rest. As they say, “Revenue is vanity, profit is sanity, but cash is King”.
Erik J. Olson is an award-winning digital marketer & entrepreneur. The Founder & CEO of Array Digital, he is also the host of the Journey to $100 Million Flash Briefing and daily podcast, and the organizer of the Marketers Anonymous monthly meetups.
Kevin Daisey is an award-winning digital marketer & entrepreneur. He started his first company when he was just 23, and is the Founder & CMO of Array Digital. Kevin is the also the co-host of the Journey to $100 Million Flash Briefing and daily podcast, and the co-organizer of the Marketers Anonymous monthly meetups.