- If a business owner in any industry makes around (give or take) $5M in sales, how much he gets to keep in his pocket?
- If a business owner sells his company for (give or take) $10M, does all the $10M go to his pocket or some of it, and does he receive it in cash or in stocks?
Umm… the answer to both of the above is that it depends?!
The term “sales” usually means top line revenue. i.e. it doesn’t include cost of goods sold. So if business owner A sells $5M worth of t-shirts, but he spent $5.5 million on cost of goods, marketing, shipping, staff, etc. then he gets to keep zero! In fact, he had to spend $0.5M just to stay in business!
The second question depends even more. There are all sorts of deals that involve cash, stock, earn outs, retention bonuses, etc.
And of course, there’s TAXES. Let’s say a company PROFITS $5M and the owner decides to take that all for himself, the government will tax that $5M at a pretty high tax rate so he may end up with less than half of that?!