Richard Branson the Difference Between Gross Profit and Net Profit
Richard Branson is not your average entrepreneur. At the age of 15 he dropped out of school and, despite suffering from dyslexia, went on to found Virgin Group, a business empire that includes airlines, cellphone companies, banks, hotels, health clubs and even a space travel business. He's worth over $4 Billion and he owns his own island. In short, the guy is loaded… and he's been knighted.
And so when we saw this answer to one of his Twitter followers questions it grabbed our attention:
Q: What talent came late to you in life that you wish you had possessed earlier? A: Surfing & kitesurfing. And knowing the difference between gross & net!
Pull up or print out the above Twitter exchange and then answer and discuss the following…
Does every know who Richard Branson is? Maybe pull up www.virgin.com and browse around the site as a group. Click on Companies on the top navigation and explore some of the companies started by Richard Branson.
Discuss Richard's answer that he wished he understood the difference between gross and net earlier in life. Does that answer surprise anyone?
Explain that 90% of employees don't understand important business measures - so Richard is not alone.
Don't ask, "Who doesn't know the difference between gross and net." Remember admitting that could be embarrassing. Instead, challenge everyone to commit this to memory:
Gross is the total and Net is the part of the total that really matters.
And then work together to come up with some examples. Here are some ideas:
Fish… Gross is the total amount of fish in the sea, but all that really matters is how many fish are in your Net… this is how Richard Branson was first taught the difference between Gross and Net.
Pay… Your Net pay is how much money you bring home each month after taxes, insurance, and other deductions are taken from your Gross pay.
P&L… When looking at a P&L or Income Statement the most important measure is the bottom-line or Net Profit. For example, an executive could brag that her company's Gross Profit was $100 billion dollars, but does that really matter if the company had over $150 billion in expenses?
If you and your team have the book Seeing the Big Picture(Greenleaf, 2012) read the following section on page 33: The Bottom Line and Other Measures of Profit.