Every owner dreams of the money they will take out of their business. Perhaps its to buy a bigger house, take more vacations, or sock money away in a retirement fund. Most contractors take a salary, and that’s it. Everything else stays in business. We talk about rolling it back into the business to support growth, but the truth is it just gets used up by the business.
Owners don’t take distributions because there is NO money to take. I am not talking about top-line revenue, but rather your bottom line profit. The goal of every company should a 20% net profit. This means when all bills are paid, there is 20% of gross revenue remaining that can support cash flow, cash reserves, and personal wealth building. Let’s cut straight to the bottom line … there is no money leftover because we run our jobs and our business too poorly to turn a profit. It’s not that we pay too much for rent, or too much for insurance, or have too large a staff. Sure, we can tweak all those things, but that is not the solution or the problem. We manage jobs too poorly to earn a profit. Until this changes, wealth building will remain a dream.
Reference: The Profit Maker – Make More Money Than Ever Before Managing Your Business Like a Pro!