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Thos[e] are not 'profit margins' It's still Income minus Expense, right? For a single founder, it's exactly as though the $25 book costs $1 to make, because
by jasonkester 9y ago
Thos[e] are not 'profit margins'
It's still Income minus Expense, right? For a single founder, it's exactly as though the $25 book costs $1 to make, because you are the printing press, binder, paper supplier, ink supplier, distributor and author.
Yes, you can arbitrarily drop that number by having the business pay you a "salary". But the end result is the same. The money going out the door (to people other than you) is a tiny fraction of that going in.
- alexasmyths 9y agoThe 90% figure refers to 'gross margins' and really means 'income minus cost of goods sold'. In software, usually 'gross margins' are meaningless - it's a term used in most other industries and from classical economics wherein most of costs were actually COGS. "Yes, you can arbitrarily drop that number by having the business pay you a "salary"." No, it's not 'arbitrary' at all salaries and operating costs are the relevant costs to the business. Software (and books) are IP businesses - the 'cost to make the book' or to 'run a website' are not useful in terms of understanding the business or profitability. FYI - for most 'software businesses', net margins (i.e. after 'salaries and operating costs') are negative.
- jasonkester 9y ago... so if salary is zero, gross margin and profit margin are the same. Which is the case for a single person business. I understand the point you're trying to make, but it's still a bit silly to suggest that my business is not profitable because I may eventually spend some of the money it makes.