Author: Greg Crabtree, with Beverly Blair Harzog
Publisher: Greenleaf Book Group: 200 pages
A Book Review by Sonu Chandiram
This book is meant for owners of businesses with revenues from $1 to $5 million. Many such business owners get confused between revenue and profits. You can have a million dollars in revenues per year, but if you do not make a single dollar in net profit (this is determined after deducting all cost of goods and services and all expenses) you do not own a successful business.
Such a business with zero profit, is of value only to the person who buys it from the existing owner, “turn it around” and makes a net profit. There are two views of profit. One view is what the owner takes from the business (part of the net profits) and the other view is what the owner takes from the business (or retains in the business) after taking a market-based (“fair” or “reasonable”) wage.
Business owners want to pay the least in taxes. Owners of “S” corporations are able to achieve their goals of paying the least in taxes through basically two ways. First,m by spending money through their business as for legally-allowed –expenses, such as business trips or customer entertainment. The second way is to take as small as salary as they can bear, so they pay the least amount in taxes.
Greg Crabtree writes that taking a small salary that is lower than market-based (fair or reasonable) gives the owner a distorted financial picture of the business.
He makes three basic points in this book:
Why your numbers are lying to you (and why you are the cause)
How labor productivity is the key to profitability and simplifying human-resource decisions.
Why the amount of tax you pay is your number-one key performance indicator.
This is a good book for business owners (and those aspiring to start a business) who want to set the right financial goals for their businesses and for themselves.
