Ep. 028 Fireside Chat: Making Sense of Accounting Metrics through Profit Measurement

Business Breaks - All Things Business

Episode Summary:

- Importance of Cash Flow and Profits
- A company can fail even if profitable without cash flow
- Fast-growing companies need to pay attention to finance and avoid bankruptcy
- Understanding customer profiles and behaviors is crucial for profits
- Risk management considerations for complex contractual arrangements
- Communication plays a vital role in financial decision making
- Maximizing gross profit is easier to understand than accounting metrics
- EBITDA and depreciation figures have pros and cons
- Managing Money
- Profits shouldn't be the only financial indicator
- Sustaining losses without profits leads to running out of money
- Pay attention to profits and the balance sheet to ensure enough cash for certain time periods
- John Byrne's personal company is healthy because he takes the money out as salary
- Measuring Profit Margins
- Gross profit margin, net profit margin, and operating profit are important indicators
- Understanding expenses and making changes can increase profitability
- Taking on Big Customers
- Small suppliers can fall into bad situations with big customers
- Maintaining a healthy profit margin is important when taking on big customers
- Dependence on one or two big customers can hurt a company
- Simplifying financial goals into three types of money: revenue, gross profit, and net profit
- Focus on maximizing gross profit to increase net profit

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