slow pay report

[Bob Cole]

[Chris Blair] “Our accountant has told us that as a service business we should be generating 12-15% bottom line net-profit, but it seems no matter how diligent we are about expenses or how agressive we are with marketing, we’ve never come close to that figure”

I don’t understand the accountant’s concern, especially with corporate taxes (if you’re in the U.S.). If you’re paying your expenses, including capital items and salaries, you’re fine. If you want to increase your net profit just cut back your salary. But why would you want to do that?

[Bob Bonniol]

With those margins I understand… My business operates fairly differently, in that we are creating content, but also providing ubiquitously talented individuals who know how to put giant stadium shows together; and then sometimes do big multi cam shoots of the same after we put them up. We operate on margins closer to 35%. So giving 8% back on the content line doesn’t really gut that at all. We don’t give it to everybody either. Most of our feet draggers are actually our largest institutional clients, where projects are pretty large, and we are able to stay on margin. Having that money totally up front, sans 8%, has worked well. The 3% to 5% for Net 30 on smaller stuff has also not affected our margins that significantly.

I can definitely understand how tightly produced project flow wouldn’t really work with this idea. Conversely, when you are sitting around at 90 days out, wondering if GIANT Client will ever pay, that upfront begins to look like it would have been pretty sweet…

Different strokes for different…uh… Margins…

Best,
Bob Bonniol

MODE Studios
http://www.modestudios.com
Contributing Editor, Live Design Magazine
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