The 4 Profit Lies That Are Keeping You Broke Ep. #477

Have you ever said, I made money this year, but I don't know where it went, or worse,

on paper, on profitable, but my bank account says otherwise.

Well, today we're going to expose the four biggest profit lies in business.

And if you don't understand these, you will always feel broke no matter how much revenue

you do.

Today's episode is brought to you by Yard Book, the all-in-one CRM for your lawn care business.

And as an exclusive partner of this podcast, you can get started today and begin simplifying

your business and maximizing your profits.

Sign up now at YardBook.com.

The link is in the show notes.

Time now for Profits with Pageak, any central podcast for you in the green industry who are

looking to unlock the full potential of your business.

Posted by John Pageak, you're a certified financial coach.

The show features in-depth discussions with successful entrepreneurs, thought leaders,

and industry experts providing practical advice and proven strategies on financial planning,

operations, marketing, and sales.

Profits with Pageak has valuable insights and action steps that you can implement today

for creating long-term success.

Now, here's John Pageak.

Welcome to Profits with Pageak.

The podcast we talk about business strategies and financial insights for the green industry.

I'm your host John Pageak, and today we're breaking down something that every business

owner thinks they understand, but few actually do.

And we're talking about profit and not just profit, but the different types of profit

and the lies that come with them.

Because if you don't understand this, you'll be chasing the wrong numbers, making bad decisions

and staying stuck.

Here's the issue.

There is confusion around profit.

It's a very simple word.

But most business owners, they use the word profit like it means only one thing.

But there are multiple versions of profit.

You've got gross profit, your net income, EBITDA, and cash flow.

And each one tells a completely different story.

And what's the problem?

If you focus on the wrong one, you could be working harder than ever and still losing.

So here are the four profit lies.

And line number one is, my gross profit looks great, so I'm good.

Well, gross profit is simply your revenue minus your cogs, your cost of goods sold.

You know, it's the direct cost to perform the work, okay?

It sounds simple, right?

But here's where guys get it wrong.

They look at strong margins and think, I'm crushing it.

Meanwhile, they might not be looking a little bit deeper and looking past that number

and realizing that their overhead is bloated.

That equipment is draining cash.

Their marketing is inefficient.

A gross profit doesn't mean that you're profitable.

It means you've created the opportunity to be profitable.

So if your gross profit is bad, you don't have a business.

But if your gross profit is good, you still might not have a truly profitable business.

And line number two, your net income says that you're profitable.

Well, net income is what's left after, okay?

All your expenses are accounted for.

You know, you've paid your taxes, all the things, right?

And this is the number of most people point to and say,

see, I made money.

You know, some of them don't actually even account for the taxes.

They just see that we made some money and then they forget Uncle Sam's got his hand out saying,

I need that son.

You know, you better open up that wallet to fork some cash over into this big palm right here.

Otherwise, you're going to prison.

But, you know, here's a problem.

The net income includes things like depreciation and accrual timing, non-cash expenses, you know.

So you can show a profit and still not have money.

And when you look at it, you know, your net income is your report card.

But it is not your bank account.

Lawy number three is EBITDA means that I'm making money.

Now, EBITDA, it's EBITDA, okay?

People say it differently than I do, but it's okay.

Earnings before interest taxes, depreciation, and amortization.

EBITDA, that sounds fancy.

I mean, and it is.

And the thing is, you know, to calculate that, there are some people that will point you

to calculate or some things like that that will show you what your EBITDA is.

But you know, it's mainly used for investors, buyers, and banks, which, I mean, that's

not a bad thing.

But here's the danger.

People treat their EBITDA like it's real money, and it's not.

It ignores the equipment purchases, the loan repayments, the money, the real cash,

the real cash that's leaving your business.

And when we really look at EBITDA, it's what your business looks like to someone who

doesn't have to live in it.

So this is like more firm investors that maybe want to buy your business, okay?

And lawy number four, if I'm profitable, I will have cash.

And this is the most dangerous one.

You know, you can be profitable on paper, you could be growing, and you could be doing

everything right, and you could still go broke.

Why?

Because cash flow is timing.

You know, when the money comes in, when the money goes out, if those don't match, you're

in trouble.

So at this point, you know, profit is actually theory when cash is the reality.

So here's how you fix this.

You know, you stop chasing profit as a single number and you start understanding the

system.

And this is exactly why I teach budgets, break evens of bottom lines because your break even

controls your gross profit, your budget controls your spending, and your bottom line becomes

predictable.

And that's where the profits are, you know, the bottom line.

When you know your numbers, you price with confidence and you sell with clarity and

you stop guessing.

And most importantly, you stop feeling broke while doing big revenue.

So you know, just real quick, you know, some of you might be thinking, hey, paycheck,

you know, you're the budget break evens of bottom lines guy, you know, why are you being

critical about this profit here?

And it's not that I'm knocking them, they're essential.

But here's what I see.

When a business, excuse me, when I tell a business owner to operate within a budget,

they feel restricted.

And in my world, a budget doesn't restrict you, it gives you permission to spend, it gives

you clarity.

And if you really want to understand your numbers, you know, I just recommend heading over

to johnpagiac.com and check out budgets, break evens of bottom lines.

But the big thing is when you start to get confused between the gross profits, the net

income, your EBITDA and the cash flow, when you don't have clarity on those things, even

though you could still show that you're profitable and you could actually still see it in your

bank account, it's not as refined.

You know what I mean?

It could literally be like a big chunk of clay, right?

You just dug up some clay, slapped it on a, a play, it was like, yes, here we go.

This is wonderful, right?

But it's not as much as, it's not worth as much as if you were to take that clay, that

big old chunk of clay, maybe put it on a spinning wheel and craft a vase out of it.

You know, you remember that movie Ghost where, you know, you had Patrick Swayze and Demi

Moore and he, you know, not to ruin the plot line, but it's been like 40 years.

But you know, she, Patrick Swayze passes away and, you know, so the stuff, but he, you

know, he's behind her and sculpting the clay and whatever, yeah, anyway, I've been weird.

But anyway, the thing is it's like that big chunk of clay isn't as worth, isn't worth

as much in its raw form and you could have raw profits, but you could have a much better,

more amazing clarity and, you know, higher end profits and everything.

And you sculpt that lump of clay into something beautiful.

You have to refine it and that's where I'm getting at with this.

Back when I was getting my long-care business off the ground, I was juggling routes, invoices,

and customer notes with paper and prayers.

It was chaos until I found the art book.

The art book gave me the structure.

It helped me track chemicals route efficiently, invoice faster, and most importantly, it

helped me grow a profitable business.

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on me.

So regardless of, you know, where you're at right now, there's three steps that you could

take that I'm going to share with you that you can, uh, that will help you.

And hopefully you've already done these things and I'm just kind of preaching to the choir.

But if not, I hope that, you know, these three things can help you and turn your next season

into a truly profitable, uh, truly profitable season for you.

So the first one is know your job costs because if you don't know your costs per hour or

per property, you're just guessing at your gross profit.

Number two is stop trusting net income alone, okay?

Compare your net income to your actual cash in the bank.

They don't match, figure out why.

And number three, track your cash weekly, not monthly.

This is a huge one, okay?

Some guys, they don't even do it quarterly.

They might just do it at the end of the season.

And that is not a very wise thing to do, you know, you got to keep your finger on the

pulse.

I know you're busy with actually operating and doing the work so that you get the cash

coming in, but you have to track these things.

And I find that tracking your cash weekly is really, uh, one of the most, uh, efficient

ways to find out whether you're making money or not because, you know, cash problems,

they don't always show up in your PNL, like over time, it's like, if you, if you sit on

that number and you're looking at it, you could watch it like a hawk, whether it's going

up or down and not get muddled, you know, the waters get muddied when you have like an

entire season, uh, of, of numbers you got to sift through.

And, um, you know, you need to have visibility right now, not later.

It's hard.

It's easy to see a fish and clear water.

It's like, oh, yeah, there's a pike over there.

I want that pike, you know, get your polarized glasses and everything you can see kind

of through the, the, the water, the reflection on the water and everything, but, you know,

if it's really muddy water, it's like, oh, you're just fish and blind, you know, you

don't know what your, your target is.

You don't know where to throw the bait, you know, nice chunky spinner bait getting thrown

up underneath them, you know, weeping willows and stuff, you know, that's where the fish

looked to hang out.

But again, you know, forgive my analogies, but, you know, your visit, you need to see right

now where your cash flows is, not down the line here.

So let's bring it home.

Your gross profit tells you if your work makes money.

Your net income tells you if your business makes money, your cash flow tells you if you

should stay in business and your EBITDA tells someone else what your business is worth.

So if you're, if you've ever been confused about your numbers, you're not alone, but

now you don't have an excuse.

So this week, pick one job, break it down, what did it bring in, what did it cost, what

did you actually keep?

And if you can't answer that, that's where you start.

So I hope that you have enjoyed this episode.

As always, God bless, he's pushing through and we'll catch you on the next one.

Thank you once again for listening.

If you've enjoyed the show, please leave a review and share it with fellow business owners.

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If you haven't checked them out yet, visit YardBook.com and see how they can give you the tools

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Also, don't forget to explore the resources and upcoming events that I've collected just

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These are curated to help you stay ahead in your business with the latest tips, tools,

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Until next time, keep pushing through and God bless.