Jeff Benning

Simple Numbers, Straight Talk, Big Profits - Greg Crabtree

I’m embarrassed of how long it took me to read this book. I run a small company (<10 people) and this cleared up some essential finance questions I should have known from the beginning.

Profit targets - Set a target for how much profit the business makes after all expenses are paid. If the business makes $1,000,000 in a year, after all expenses paid (including owners salary), the business should retain at least 10% ($100,000).

• 5% - Business is on life support

• 10% - Healthy target

• 15% - Thriving

Types of cost

• Fixed Cost - Stays the same regardless of sales volume

• Variables Costs - Vary based on sales volume

• Step Variables Costs - Costs that must be added before they can be fully used (Office space, new hires)

Salary Cap - Treat your available workforce like a salary cap. If you don’t have the income, you can’t hire more people. Instead, you should raise prices, reduce costs, or increase productivity.

Rules of thumb for evaluating business value

• Multiples of EBITDA

• Multiples of sales

• Liquidation value (for non-profitable businesses)

My biggest takeaway

“The right employees doing the right jobs give you labor efficiency that can beat your competition. Labor efficiency is the number one driver of profitability”