now usually I try to make videos that inspire you to travel or JC dreams and I much rather you watch those but you realize that a lot of times chasing your dreams end up becoming a business so I thought I'll in the helping hand or to the first of our return ratios which one is it profit margin the Big Kahuna I think this is the second time I've said big kahuna in my videos but ok whatever what exactly is profit margin it's the chunk of money we get to keep in our pockets after collecting a bunch of money from our customers so sales is the money we're collecting ok but I always tell you don't get ahead of yourself is because you're collected and doesn't mean you get to keep it we have to pay to run the show our expenses right so the money we get to put in our pocket is the income that we've earned ok so after paying off the tax man after paying off our interest after paying off the suppliers and paying our rent whatever other expenses are insurance whatever else is due the amount of money we get to put in our pocket that's the net income so really we can sell a lot of stuff let's say we sold a bunch of stuff and we collected a hundred thousand dollars right from our customers let's write it down because this is where things start getting a little funky so this is our revenue when I say revenue I just want to keep it simple here so I'm gonna say / sales to save the day ok a hundred thousand dollars do you want to get excited over a hundred thousand dollars in revenue if you had to basically pay to other people ninety thousand dollars is it worth it at that point I mean $10,000 is more than we've seen in a long time so perhaps this is the ideal example to be dramatic here but since I rewrote it I'm going to commit here expenses and net income okay so this is the amount of money we get to put in our pocket but we collected this much so let's say it was another example here we collected a hundred thousand dollars and we paid ninety-nine thousand dollars in expenses so we only get to put a thousand dollars in our pocket after collecting a hundred thousand dollars I would be gutted if that was the case okay so that's why we have to measure on profit margin it basically tells us out of all the money we're collecting sales whoa mike is it showing here so how much do we get to put in our pocket okay and thankfully it's very simple simple formula but I want you to I want you to be ingrained in your mind what it entails alright we're collecting a bunch of money but we don't get excited yet whenever you and I talked about the money we collect from our customers we have to be calm like the ocean well some motions cuz some of them have like waves and stuff in tides and whatnot but alright whatever like a calm lake right after we calculate all our expenses that we have to pay out to people we owe whatever our interest Uncle Sam or if you're not in America uncle ah what does any other country of Uncle anything else that's actually interesting question now I have to do some research but okay hopefully I don't get another I don't get often another tangent but how much money are we able to keep after paying everyone that needs to be paid as a result of us running our show this is what our profit margin is excited about okay and you should be excited about it too because we don't want to just collect money for the sake of we're not collecting money so we can give it away to other people okay how much money do we get to put in our pocket income the bottom line of that income statement the top line generally is going to be your sales how much money able to collect from people but after all is said and done and begin to the very bottom how much we get to put in our pocket so very simply you would look at the income statement you don't have to go to money statements there everything he's gonna be income statement let's say we brought in arm let's say we were able to keep that you let's use this example we're able to keep ten thousand dollars right put in our pocket but we collected a hundred thousand dollars so just follow hundred thousand dollars our sales $10,000 is our income our net income very important at the end of the day what we get to keep after the periods done okay the profit margin for a stake of storytelling it's going to be one to ten but really you're going to be speaking about profit margin in terms of percentage so when you see up ten percent okay so this is really just point one so ten percent profit margin what does that really mean that means you get to keep in your pocket ten percent of what you collect from your customers and that's it don't anyone confuse you that's what your profit margin is as soon as you're able to calculate it which we did we find our net income divided by how much we're able to collect along customers we want to know how much do we actually get to peep okay and if it's eight percent that means we get to keep eight percent of what we collect from our customers alright so out of every ten dollars we collect we get to keep one dollar in our pocket ten percent of it okay don't let anyone fool you because this is a big one if you see any percentage to tell you well the profit margin on this product is seventy two percent that's all amazing okay seventy-two percent is insane for every dollar you collect you're keeping some sense that's huge that's how you gotta think about it hopefully it's starting to make sense why we I don't know how why we had to fundamentally reduce all of the financial statement elements so that you're able to actually digest and have a conversation about what's going on and I'm done with my weight accident you probably couldn't even tell I was putting on an accident I'm so bad at them but up that was profit margin very simple net income over sales thank you so much for watching turning a dream into a reality usually ends up becoming your business that is why we have to help enhance videos subscribe like and feel free to leave a comment 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