Books To Scale? The Number on Financials That Equals Success or Failure.

Books To Scale is a name that implies you need up to date books before the business and the business owner can start maximizing its financial punch. If the books are not up to date, tycoons often confuse their baby for being not profitable or very profitable. There is a common narrative among entrepreneurs that revenue is king! But, if revenue is king, where does that leave Gross and Net Profit? Plot twist, what about EBITDA (Earnings Before Interest Taxes Depreciation & Amortization)??? Mix in the word “cash flow” and the most educated of business owners will be scramming to find the story that makes them feel good or terrible about their choice(s).

So, which one of these metrics matters the most to you? Like many things relating to financial topics -it depends. Depending on your business structure, net profit will be what the IRS bases your tax liability on. But, that can be manipulated with depreciation to paint a very different picture of your operations.

If you are looking into investing into an enterprise, EBITDA should be the figure you care about most to value the viability of a business. Using gross revenue doesn’t take into consideration operation expenses like cost of goods sold to get Gross Profit. Net profit will have deductions you may not see in the future due to outlier capital expenditures that get section 179 depreciation treatment.

Instagram accounts with millions of followers’ shout “cash flow is king” as their metric of choice to guarantee success! This ideology will get make the bottom half of your balance sheet look scary! In addition, the cost of capital for this strategy will make you really question how this strategy is financially sustainable. There’s a co-mingling between entities factor that will bite most users of this strategy in the future.

Bottom line (pun intended), there is no one size fits all metric that defines a successful business. Regardless of which metric you choose, or how you define a successful business, you need a set of accurate reconciled books, then maybe you can scale.

Must Read if You Are Receiving Unemployment

Californians are getting the short end of the federal unemployment stick due to the $100 minimum state unemployment payment stipulation buried in the executive order that was signed by the President

How you ask? As written right now, in order to receive unemployment in CA, you must keep looking for work, and you must not turn down work if offered to you. The wages earned reduce your unemployment weekly payment, thus, if you were awarded the max ($450), teach a few classes as a teacher for autistic kids at a school that opened up where you earn a total of $351 for the week, your state award will be $99 before taxes. This means you will not get the $300 additional stimulus that week and your only total income that week will not include the unemployment boost ($351 teacher wages + $99 CA unemployment = $450 total).

The reason this applies to Californians is because California's Governor Newsome already said they will not be able to afford to pay those receiving the federal award the extra $100 per week (this is a not related to the previous $100 mentioned in the first paragraph of this post). The program signed into action also said, that the unemployment boost would be funded 75% by the Feds & 25% by the States. The math works out to $300 Federal +$100 State = $400 total possible unemployment boost. Since CA will not be able to afford the $100 per week in that calculation, those on unemployment wouldn't get the state's responsibility portion of the unemployment boost. Some states are going to be able to pay the boost like West Virginia, Montana, & Kentucky. I must say, California keeps looking a little less attractive every day :) and as everything these days, this is probably true- for now.