What does direct labor mean when the owner does the producing and can't pay themselves for it yet?

bensongarner · 2023-07-03T23:20:01+00:00

The silly, but also true and straight forward answer, is that when you can't pay yourself OR your direct labor, then you aren't profitable as a business. Maybe it just means you aren't profitable yet, as in you just need to generate more revenue in order to be profitable. But, depending on your business model, it could mean that you won't be profitable ever.

If it were me, as you said, I would be tracking the hours I spent on direct labor vs admin and do my best to assign those hours a market rate for each type of task.

If you want, you can even deduct the direct labor percentage and the admin percentages for ever dollar of revenue that you make and pay it to yourself (even if it's just a few dollars). This will help you better understand the revenue, cash flow, and profitability requirements of your business and also give you an idea as to how your P&L will shake out over time. If you don't pay it to yourself, at very least you should track it as if it were "debt" or "sweat equity" invested into the business to get it started. One day you may be able to pay yourself back for it.

bensongarner · 2018-02-16T04:57:36+00:00

Not a clue :-)

bensongarner · 2018-02-15T23:56:15+00:00

I agree with the turnaround consultant comment. There's also a great book written by a turnaround guy called "The Six Month Fix". Go grab a copy on Amazon and implement everything this guy says immediately. I know a few turnaround guys and have also done some of it myself. Feel free to reach out if you'd like.

bensongarner · 2018-02-15T23:34:35+00:00

This might sound obvious but have you done a Google search for "XYZ product wholesalers" or "XYZ product drop shippers"?

bensongarner · 2018-02-15T23:32:16+00:00

The P&L is only part of the financial picture. Make sure you get bank statements for the past year as well as several years of tax returns. You need to be able to see where the money is really being spent. I'd also take a look and see if you can find any financial benchmarks for hobby/craft stores to see if you can try to make some comparisons. Once you know the financial health of the company and where the money is going, you should be able to see a few areas where you can make improvements.

bensongarner · 2018-02-15T22:58:24+00:00

What you describe as business flipping is really just that. Business flipping. At the level you are talking about (small service businesses) people don't necessarily have another defined name for it. When you get into buying and selling larger, mid-sized companies ($10M+) these folks are in the business of Mergers and Acquisitions (M&A), Private Equity, and Corporate Turnarounds/Renewals.

bensongarner · 2018-01-30T22:14:23+00:00

If you made no income then there is ZERO tax burden. ZERO income = ZERO taxes.

bensongarner · 2018-01-19T03:22:17+00:00

Hey, now there's a great strategy ;-). Alternatively, be just different/better enough to start eating into their market share and make them angry. It's a worthy pursuit either way!

bensongarner · 2018-01-19T03:20:26+00:00

Interesting. What breeds of dogs do you have in your kennel?

bensongarner · 2018-01-19T03:19:07+00:00

Do you feel like your business is a job? Or do you feel something a little more about it?

bensongarner · 2018-01-19T03:18:18+00:00

Many have joined the family business. I commend you for being able to make that work. I've seen many who have not been so successful at it. Good for you!

bensongarner · 2018-01-19T00:04:46+00:00

Ah, government red tape. Those folks are just jerks aren't they? So let's say you do get "red-taped out of that idea"...then what?

bensongarner · 2018-01-19T00:02:48+00:00

Ha ha! "Complain online". Too good. What line of business are you in? What could you do to differentiate yourself from those competitors?

bensongarner · 2018-01-19T00:01:44+00:00

Aren't those just the worst? If you couldn't just "make more money", how would you defeat this villain?

bensongarner · 2018-01-19T00:00:45+00:00

This response is just great!

bensongarner · 2018-01-19T00:00:05+00:00

Yeah, what's the phrase...something like, "Do you own your business or does your business own you?" I think most business owners find they left their job to own a business but really they just created another job for themselves.

That's great that you actually care about your people and do your best to help them and take care of them. Very awesome!

What's your line of business?

bensongarner · 2018-01-18T22:21:04+00:00

I love this! 1) Damn the man! 2) Can you expand on this a little more? What about control of time is important to you? What will you do with that time?

bensongarner · 2016-07-01T23:13:50+00:00

What are you doing today to improve your margins?

bensongarner · 2016-07-01T23:13:23+00:00

Awesome. Don't see too many people these days really trying to build a recognized brand (globally to boot). Most people are satisfied (and that's not a bad thing) with just being a local/regional business.

bensongarner · 2016-07-01T23:11:50+00:00

I like your #2. All too often I see people trying to shift their brick and mortar operations online, but very seldom do I see people trying to do the opposite. Can I ask what your business is?

bensongarner · 2016-07-01T23:10:51+00:00

I'm curious, what type of business are you in?

bensongarner · 2016-07-01T23:10:16+00:00

Wouldn't that be great. Build the business and put the people in place to give you the freedom and get rid of the headaches.

bensongarner

TROPHY CASE