Switch How You Present Your Profits for Greater Impact
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Here’s a simple tip you can implement in your business immediately.
In your planning documents, use percentages for profits instead of dollars.
This tweak is small but important because it changes how your team thinks about profit in your business.
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I’m a big fan of transparency inside an organization. That’s why I advocate for reviewing your numbers with your entire team during your State of the Company meeting every quarter.
But past a certain point (around $500K net profit), using dollar amounts can become a distraction.
- The team starts to wonder how much of that money the business owner/senior leadership team really keeps
- Which leads them to compare company profits to their own salaries
- Now you’ve got a referendum on your personal income as owners and senior leaders …
…and that really isn’t the point.
The point is that a healthy company needs to hit certain profitability benchmarks. The owner’s compensation isn’t especially relevant to that conversation. If you want to sell, or be set up to sell one day, you need a gross profit margin and net profit margin (or EBITDA) that align with the standards in your particular industry.
By switching from dollars to percentages, you help keep the team focused on what they need to be doing: improving margins until they hit their targets.
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You may have figured out by now that if you’re putting up revenue numbers and using profit percentages, you’re a quick calculation away from getting the actual dollar amounts.
That’s true. I’m not suggesting you try to hide your numbers.
All I’m really trying to say is that if you switch up the way you present them, you’ll give your team the right perspective and minimize the focus on any one person’s personal financial situation.
You have nothing to hide. Anybody can do the math. But as a culture, we have so much head trash about money that it’s best to keep things as clean as possible.
So here’s my rule of thumb. Once you hit 10% or over $500,000 in net profit (whichever comes first), switch over to using percentages instead of dollars in your presentations.
A simple shift, but an important one.
Try it today, and let me know how it works for your team.
P.S. If your profit targets aren’t anywhere near industry standard, you have a bigger problem than how you present your data. Send us a note and we’ll connect you with a consultant who can help.
