Simple Numbers Big Profits

The Lie Every Business Owner Tells Themselves

A man and his wife walk into Greg Crabtree's office in Huntsville, Alabama. They co-own a business doing about a million dollars in revenue. They are proud people. They tell him their net income is north of twenty percent, which would put them in the top tier of small-business profitability anywhere in the country. Crabtree looks at their books for ten minutes and then asks a single question. He asks what they each paid themselves last year. The husband, slightly embarrassed, says they took small salaries because it was tax-smart. They made up the rest with distributions. When Crabtree adds back what those two owners would actually cost on the open market if they died tomorrow and someone had to be hired to do their jobs, the real pretax profit on that business is five percent. Not twenty. Five. And five percent, in Crabtree's world, is not a profit. Five percent is life support.

That story sits at the center of *Simple Numbers, Straight Talk, Big Profits!*, and it explains why the book exists. Crabtree is a CPA who spent five years at a regional accounting firm and three years as the controller of a community bank before opening his own practice in 1986. He joined the Entrepreneurs' Organization in 2001, where he started teaching financial discipline to founders running businesses between half a million and a quarter-billion dollars in revenue. After looking at hundreds of P&Ls from real companies, he reached an uncomfortable conclusion. At least nine out of ten of those owners were either underpaying themselves, overstating their profitability, mismanaging labor, or starving their business of cash, often all four at once. The book is his attempt to fix it. It rests on a single sentence he repeats like a refrain. Revenue is for show. Profit is for dough.