PROFIT MASTERY PRESENTS
The Profit Move
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THE NUMBER
3
profitability milestones sit on your P&L. Most owners only watch the last one.
Gross profit. Operating profit. Net profit. Three different questions, three different answers.
Gross profit asks whether each sale makes money after what it cost to deliver it. Operating profit asks whether the core business covers its overhead. Net profit asks what is left after everything, including interest, depreciation and tax.
Read only the bottom line and you can watch net profit fall with no idea which of the three broke. Each one is a different problem with a different fix.
▍WORTH KNOWING
The Fed decides September 16. It may not move the loan you care about.
The Fed has held its benchmark rate at 3.50% to 3.75% since December. It meets again September 15 and 16. Prime has sat at 6.75% through all of it.
A line of credit is almost always priced off prime, so it moves when the Fed moves. Most equipment loans and commercial mortgages are not. Those track longer-term Treasury yields, which run on their own schedule.
A cut helps your revolver and may do nothing for the term debt already on your balance sheet. Know which one you are carrying before you plan around it.
Source: Federal Reserve FOMC calendar and current target range. Verified Aug 31.
▍THIS WEEK'S MOVE
Mark your three milestones.
Ten minutes.
Open the P&L for your most recent closed month. Find three lines and write each one down as a percentage of revenue.
• Gross profit divided by revenue
• Operating profit divided by revenue
• Net profit divided by revenue
Now run the same three for that month a year ago and put them side by side.
The gap tells you where the leak is. If gross margin held and operating margin fell, the problem is overhead. If gross margin fell, the problem is price or cost of delivery, and no amount of overhead cutting will fix it.
One check before you trust the first number. Direct costs are what it takes to make or deliver what you sold. Materials, freight, direct labor, subcontractors. If office payroll or rent is sitting in there, your gross margin is fiction.
▍THIS WEEK'S ARTICLE
Anatomy of the Financial Statements (Pt. 1)
Saturday's piece opens the hood on the P&L. What earnings power means, where the three milestones sit, and four ways to look at the same statement. Colin's favorite is the rolling 12-month view, which closes out a full year of financials every month and strips out seasonality.
Part one of three. The balance sheet and cash flow statement are coming.
Free to read. Substack will ask you to claim it first.
▍UPCOMING
Price for Profit, Not Just to Win the Job
Friday, September 25, 10:00 to 11:00am ET, virtual. $39, free for PM Pro. Register
PMU Virtual Bootcamp
Six sessions, December 1 to 17, Tuesdays and Thursdays, 2:00 to 4:00pm ET. From $495, free for PM Pro. Details
Whichever milestone slipped, price moves all three.
It is the fastest lever you have on profitability, and the one most owners are scared to touch.
• Spot where you are underpricing today
• Model what a price change does to profit before you commit
• Have the conversation with customers without losing them
Friday, September 25, 10:00 to 11:00am ET. $39, or free with PM Pro.
Three numbers, ten minutes. Which milestone surprised you?
Thanks,
The Profit Mastery Team
Know your numbers. Command your cash. Scale with confidence.
The Profit Move is education, not personalized financial or investment advice.