Entrepreneurs and small business struggle daily with how to determine their profitability. Greg shares his proven insight to help you compensate yourself and your employees. Contribution dollars must cover operating expenses. You can’t get profitable enough in changing OPEX to put a dent in your numbers you should be focusing on labor – human productivity, revenue by person and justifying clients based on their LER. You should build corporate accountability by paying fair market compensation for fair market performance. And before opening up your books in an effort to achieve transparency, be certain that the owner is able to talk numbers and no inconsistencies exist in your schema.
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Key Takeaways
[1:25] How Entrepreneurs/Owners should pay themselves
[3:40] The market picks your pay
[5:07] Distributions explained
[7:37] The 10% breakeven
[9:17] Clearing the distortions of real revenue
[10:01] Gross margin + Direct Labor = Magic
[11:08] What exactly defines direct labor?
[12:33] Growth is business model dependent
[16:02] The thinking model
[18:01] Management should be held accountable
[19:53] Your focus should be on revenue, direct cost and direct labor
[20:18] The simplified message is watch your labor not your toilet paper
[23:03] LER, use gross margin as the calculator
[25:19] Compensation does not change performance
[27:00] Everybody’s an A player, somewhere
[28:00] A severe case of open book
[28:55] The true cost of unproductive labor is the disruption to the rest of the team
[30:15] Two pre-conditions to opening the books for transparency
[31:58] Use the bonus as a confirmation that the employee achieved their goals
[33:10] You can never replace leadership and management with monetary incentives
[34:40] An example of a market based wage, equitable compensation
[36:29] The salary cap for non-sport related businesses?
[38:47] Cost of living raise is an invalid argument when it comes to compensation
[39:55] Time is not a factor in compensation, you must demonstrate your performance
[40:44] 5 factors determine your worth
[43:09] Contact Information