(Time to read this Blog is about 3 minutes)
Before we get to the main topic, here are a few things to get you thinking or smiling:
- My Biz Quote of the week:
“Any policy, action or inaction that creates customer confusion, stress or doubt is a huge ‘brand-damager’ and relationship destroyer. Identify it and deal with it immediately!”
…Donald Cooper.
- Quick Biz Tip:
Use insights from new employees to help improve your business:
New Team members have a different and useful perspective about your business. So, when you hire a new employee, tell them right off the bat that in 2 weeks and again in one month you’ll be meeting with them to chat about what they have found confusing, inefficient or counter-productive…and how we can do better. No thought or suggestion is too small.
Ask them to make notes to keep track of what they observe…and then have your two meetings with them, without fail. ‘Thank’ them for their insight and develop a Plan for how you’ll use the information received to improve your business.
- Fun Fact: A May, 2026 Gallup Poll reveals that Americans are significantly less opposed to living near a Nuclear Power Plant than an AI Data Center.
- A not so Fun Fact. According to The Mental Health Commission of Canada, in any given week, 500,000 Canadians miss work due to a psychological / mental health issue.
- I’d like your opinion. Getting your business name, marketing slogan and advertising message ‘just right’ is important. Pet supply retailer, Pet Smart has 1690 locations across North America. They’re huge! Their slogan is, ‘Anything for pets.’ But, I think it should be, ‘Everything for pets!’ and I want to write them about this. But, first, I’d like your opinion.
If you have a preference, please email me at donald@donaldcooper.com.
Now, to this week’s important topic:
Educating your Team about the real math of profitability:
A Survey I read a while back revealed that most people think that businesses make a net profit of 24% to 40% of sales. The reality is that, on average, businesses generate an after-tax profit of about 4% to 5% on sales.
So, there’s a massive disconnect between what people believe about business profitability and the reality of profitability. Simply put, most people think that owning a business is a ‘licence to print money’…and it isn’t.
It’s important that your Team members understand the real math of profitability to focus them on the importance of efficiency and productivity.
For example, one of my Biz Coaching Clients, in the construction industry, has a Shop Rate of $80 per hour. His crew are paid about $35 per hour each and they assumed that the rest ($45 per hour) goes into the boss’s pocket.
What they didn’t realize is that the $45 an hour that didn’t go to them has to pay for employee benefits, Project Designers, Crew Supervisors, purchasing, accounting, other Head Office staff, rent, insurance, utilities, machinery, equipment and trucks, interest on bank financing, sales & marketing expense and federal, provincial and local taxes. What’s left for the business owner out of the $45, after all those expenses, is about 4 cents.
The real math of profitability will be a big ‘eye-opener’ and important reality check for your Team. But how do you effectively convey this important information to them? I used the ‘Mug of Pennies’.
Back in my days as an award-winning fashion retailer, I kept a mug of 100 pennies on my desk. When interviewing a potential employee who seemed like a good fit, I would ask them to hold out their hands and cup them together. I’d pour the 100 pennies into their cupped hands and explain that those 100 pennies represent a dollar of sales. I would then remove 7 pennies from their hands, place them on the desk in front of them and ask them to dump the rest of the pennies back into the mug.
As they stared at the 7 pennies, I would explain that after we paid our suppliers for the products we sold, and paid wages & benefits, rent, utilities & insurance, advertising, and all the other operating expenses, 7 cents is all that’s left. Then I’d say, “Oh, I forgot the federal, provincial and local government.” And I’d pick up 2 of the 7 pennies and add them back to the cup…leaving just 5 pennies.
Then, I would explain, “Those 5 pennies are what’s left out of every dollar of sale to reinvest in growing the business, to build a financial cushion to protect us during the next economic downturn, and to compensate our shareholders for their investment in the business.
So, imagine if we don’t work efficiently every day, work as a team every day and focus on delighting our customers every day, how easy it will be for those 5 pennies to also disappear, along with the business and every job in it.”
Finally, I would add, “If you’re nervous about working in a business that is that financially fragile, good luck, because those are the average profitability percentages for most businesses in the world.”
This little demonstration, that I call ‘Profitability 101’ takes just a few minutes, but effectively disabuses employees of the foolish notion that owning a business is a ‘licence to print money’.
That’s it for this week…
Live brilliantly and be kind to each other!
Donald Cooper
Donald Cooper speaks and coaches internationally on management, marketing, and profitability. He can be reached by email at donald@donaldcooper.com in Toronto, Canada.
