Business Alchemy 101 Lesson 21–Gross Margin Factor (Discussion)

Gross Margin Factor is very important for managing the finances of a company. We use this ratio all of the time in real life and do not realize it.

Pretend for a moment that your child/niece/nephew/neighbor is doing a fundraiser for his or her team. The wonderful people that came to introduce the fundraiser to them has given each of them a list of prizes they can earn by selling different volumes of the product or services. Also, there is a grand prize for the person who sells the most.

This scenario is a different way to look at the Gross Margin Factor. At the end of the fundraiser, they will count all of the money raised and then they will separate it all into the volume that each boy or girl sold and stack them next to each other. Each pile becomes a percentage of the total sales, with the target being to find the highest percentage.

With Gross Margin, the total is all of the sales, but instead of looking for the highest percentage, we are instead looking for one specific pile–the Gross Profit pile. This would be like looking specifically for little Suzy’s pile rather than just the highest pile. Once you have found Suzy’s pile, then you can compare it to the others and see if she won or not.

In the business world, little Suzy’s pile is the Gross Profit. The other piles would be the Cost of Goods Sold and together the piles make up the total sales for the company. Clearly you are going to want the profit to be as high as possible to keep your company healthy.

Your business THRIVES on a solid Foundation!

The Biggest Competition in Business in Years

As I sat listening to Joe Woodard (google his name, he is THE go to person for all things QuickBooks), I heard his predictions about the future of QuickBooks and became very excited.

There is a competition looming on the horizon that is perhaps one of the biggest competitions in business that I have seen in my lifetime. This competition revolves around the successful implementation of an online business platform.

You may ask how there could be room in the cloud for such a large development considering how well the internet and SaaS have expanded. The best explanation I can give is to reference Google.

Google is a great example of an attempt at a platform. Google is somewhat like the developer that puts together the beautiful mall.They do not sell anything. They do not offer solutions, they merely offer the real estate that people flock to for their internet searches, socializing, posting of pictures and documents, managing email and calendar, hosting websites, and on, and on, and on.

What resource offers that same solution for small businesses? Yup, no one. This is the open space that Intuit is driving toward with QuickBooks Online. This is the prime real estate that is still up for grabs despite QBO’s head start. Who will become the Google platform of the business world?

1099 or Employee?

I am frequently questioned about whether a person hired can be paid by as a sub-contractor or as an employee. My answer is usually the same advice I was given when I was the individual being hired as the sub-contractor: the employer bears the majority of the burden and liability.

Should a sub-contractor become injured or angry during his employment, there are many benefits that he or she is not privy to as a sub-contractor like worker’s compensation and federal withholding. There are many fines and penalties the employer is subject to if certain policies are not upholded that clarify the relationship as a sub-contractor.

ADP has done a good job of laying out the details on this topic in this link: 1099 vs. W-2 Other

Business Direct Podcast Interview

Since the time of the interview, I have joined the accounting firm of Piercy, Bowler, Taylor and Kern and I continue to offer the same services through them.

I was recently interviewed on a  podcast (online radio show) and wanted to share this with you on my website. You can listen to the podcast below or read the transcript.

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bdm-interview-picture_jeremy-lottIn order to build a successful business, you need to make smart decisions. In order to make smart decisions, you need to have proper data to base your decisions on. While you can use your gut to make decisions, having an accurate and reliable data will lead to more successful results.

In this episode, we’re speaking with Jeremy Lott about how to make better business decisions using proper accounting systems.

Jeremy is an accountant and QuickBooks ProAdvisor. He works with business owners that want to be able to use QuickBooks to help them make their most difficult business decisions, increase profit, and improve cash flow.

For more information about how Jeremy can help you, visit Foundationbookkeeping.com

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Monthly Bookkeeping Maintenance Part 2

Jessica’s glass bead making hobby quickly grew from a casual way to enjoy her free time to a profitable small business. As her income changed from a way to simply cover her costs of making beads into a monthly profit, Jessica realized that she was going to have to act more professionally about things.

Starting a small business required a business license, a website and some business cards. Jessica also was going to have to file taxes on her income but she had no idea how to put together a financial statement and she did not have time as a stay-at-home mom to be able to figure it all out.

Jessica hired me to take a look at things. Her needs were only a minimum and so I charged her $125 a month to take care of entering all of her receipts, her income and preparing financial statements. This amount was easily covered by the profit she made each month and she no longer has to worry about what to do with her receipts.

Jessica has said that using my services is better than chocolate, a bubble bath and Yanni music for relieving stress. She knows that good bookkeeping is a foundation for her now thriving business because…

…Your business THRIVES on a solid FOUNDATION!!!

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