Why Making a Profit Isn’t Enough to Survive in Business
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- Опубліковано 11 вер 2024
- Today we’ll hear about:
• A business owner who made $8 million last year but is going broke
• The best way to structure bonuses for your team that doesn’t negatively affect your profits
• Someone wanting to buy a gym, but the current owners aren’t being honest
• What to take into consideration when determining how to pay yourself as the owner of a business
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• Stages of Business Assessment: ter.li/pkurwg
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The last call in this segment: Dave is not correct; he's being way too broad when saying "it doesn't matter" whether you pay yourself in wages or distribution from the business.
As a sole proprietor he is correct, but if the business is taxed as an s-corp, you pay income taxes on the business - *without incurring either side of FICA* - after owners pay themselves a 'reasonable' wage, as well the potential for a 20% small business tax credit from the trump tax cuts.
At $75k profit, caller is probably on the border-line of when to switch, but if his CPA is recommending distributions over wages, there is probably a reason, that shouldn't get steamrolled with Dave's way too generalized statement. Hopefully the caller has more in-depth discussion with his CPA.
Great video, favorite Ramsey channel.
Nah, there is a gap where you could avoid the self-employment tax if you are a S-Corp. In 2024, you pay employment tax on 168k, if your salary for the business is 65k and you take distributions on 35k then you do not have to pay self-employment tax on the 35k. However, the IRS needs to view that 65k as a reasonable salary for a person doing your job at the company.
I have watched so many of these videos that Dave answers this question and does not know what he is talking about.
The temp employee provider's contract allows employers to evade the normal fee they have to pay a recruiter for finding a full time employee.
Not only is that bad for this temp employee operator, it hurts all the full-time-employee staffing agencies.
Employers simply negotiate down the number of hours of a temp worker that must pass before they convert them to full time.
It's like a gas station operator saying 'pay for the first 100 gallons then we sell you our gas station for $0.00"
Not too bright. Even if it's 'standard', that doesn't mean they should blindly accept and put themselves (and all full-time staffing agencies) out of business.
I would run Matt’s business as follows incentive wise. Let’s pretend you start out at 5% commission. But then you also get a bump with your life switches to permanent employment. So let’s say you have 30% of your contractors hired on as permanent employees your new standards becomes 7%
So as long as you have a 30% permanent transition you get 7%
If it goes up to 50% you get 9%
Then it rolls back as those lifetime averages change.
For the algorithm.
Is that a paid promotion for accounting systems or no Dave?
Nah, he advertises for free.
Looks like the face on camera may have some dust on the lense or sensor.
How do u value a business, the wee fabric shop i work in is closing but someone is interested and im wondering how u value it
1-3x net profit + the cost of the depreciated assets (tools) @ruthirwin8222
3 times the profit that the business makes
If it’s closing, just buy the assets. No need to buy the customer base
@@joseborrero2402no it’s not that simple. Valuations are based on a lot of different things. Typically they’d based on market data on sales on similar companies in similar/the same area. So if you owned a company in this region that did X and a similar sized company in this area sold for 6X EBITDA then the valuation would likely be that. There is not special multiplier number that applies to all companies or even an industry
Cash flows
Negotiation and Business Policy is the problem. You can get the job done by borrowing money and getting profit on it by charging interest to make money. If you have a good business policy and once they accept the business contract you will win because they accept the deal.
Why Making a Profit Isn’t Enough to Survive in Business?
Calculate your expenses with your monthly expenses (Product Spending and Employee Pay) and monthly earnings. Then start questioning.