Starting a Business Series: Gross vs. Net Income

Who cares about what you make, it’s all about what you keep.

It is far too common for business owners to focus on Gross Income vs. Net Income.  This makes owners feel better when their Net Income is not good.  It also pushes people into the mindset of focusing on making that next sale or obtaining that next contract vs. actually netting money.

Focusing on the gross also allows industries to heavily market and promote those that gross a high volume, which pushes people that are competitive to beat that high gross sales volume and ignore their own net.  However, there is very little focus put on a small business’s net in most industries.  This is how bad culture is formed and how small business die.

Gross Income can be good to track trends and to ensure you are negotiating effectively on the sales side of things.  However, to be a successful small business you need to produce a viable Net Income.  Net Income is what keeps the doors open, your staff paid, debt loads low or zero, and your own family fed.  You should consistently assess what you are netting and scrutinize all expenses to ensure there is no unnecessary spending taking place.  Keep all expenses accountable to the Net Income they provide.  Focus on your Net Income.

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