CHAPTER 8

Calculate Your Business Value

What a Paycheck Teaches

As we learned in Chapter 1, all organizations need viable business models, and “viable” means more cash comes in than goes out (at the very least, as much cash must come in as goes out). This is true for almost all enterprises and individuals. This chapter will help you grasp a key way potential Customers value your services.

To track their performance, organizations use an income statement, an itemized list of sales and expenses. Income statements help organizations understand their operations — and remain viable.

While few individuals use formal income statements, most use similar tools. For example, people balance their checkbooks and use budgets to track bills and paychecks.

Let's learn about income statements by looking at a personal example. Then, we'll see how the same concepts apply to enterprises.

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Emily's Income

Emily earns about $4,000 per month as a supply chain analyst at the Giant Shoe Company. After paying bills each month, she manages to save $450, which she deposits into a money market account.27

Readers, let's see a show of hands: How many consider pocketing $450 each month a fat profit?

Though $450 seems modest, in business terms, it's more than an 11% profit ($450 divided by $4,000). Few companies are able to save 11% of their income. So believe it or not, on a percentage basis Emily is more profitable ...

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