3 Things You Don’t Know About Hitting $20m
When you start to hit $20 million, a lot starts to change.
1. Your Profit Margin Decreases
First of all, you might find your profit margin start to drop down into single figures. I know if you’re running like a $100,000 to one million dollar business, your profit margin might be ten to fifteen percent. That’s pretty much industry standard. But at the end of the day if you’re talking only 10% of $2m, that’s a huge profit at the end of the year.
2. Your Aged Receivables Grows
With more jobs going on, you’ll have jobs that can’t get completed on the day (so you can’t invoice). Or you have stock issues or sick staff. You’ll have a lot of that at $20 million. Because you’re doing so many jobs now, there’s so many jobs that have the potential to not get completed. As a result, you’ll find that your age receivables might go from 5 to 10 grand up to anywhere between 200 to 300 thousand dollars.
Which is crazy!
But when you’re that size business, that’s just normal. That happens all day, every day. You’ve got to have enough money coming in to keep you afloat – to get you through the next week.
3. You Need Creative Accounting
When you start to have all that cash coming in, where the hell do you put? You need to start getting creative with your accountant in terms of dispersing the cash into different areas. Do you start up a new business? Do you start to put it into another company that buys and sells property?
You start to have these good problems that come with being a $20 million company.