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CHAPTER 8 MASTERING YOUR MONEY
Net Income After Tax
= Sales Revenue- COGS – Fixed Costs - Taxes
The ultimate aim of running a successful business is to keep
increasing your ‘Net Income’ by at least 20% every year.
Again, you need to achieve this constantly by focusing your
efforts on increasing your sales revenue and reducing your
COGS and fixed costs.
Another measure of your company’s success is by expressing
Net Profit as a percentage of Sales Revenue. This is known
as its ‘Net Profit Margin’.
Net Profit Margin = Net Income (Profit) x 100 %
Sales Revenue
In this example, the Net Profit Margin (NPM) is $203,200/
$1,000,000 x 100% = 20.32%. To make it financially
worthwhile, your business should have a NPM of at least 10%.
This means that for every dollar in sales, you receive $0.10
in net profits.
Report Card 2: The Balance Sheet
The second company’s report that you must pay close attention
to is the Balance Sheet. The balance sheet tells you how much
SECRETS OF BUILDING MULTI-MILLION DOLLAR BUSINESSES 249
