Tag: revenue

I often talk about work at home. I want my 3 children to learn as much about business and entrepreneurship as possible. In the same way languages are easier to learn when you are younger, good business lessons are easier to learn before you become a cog in a machine. I learned that from reading Rich Dad. Poor Dad. And from becoming a cog in a machine.

The Proposal Parade

My advertising and idea agency, The Weaponry, has been writing a lot of proposals lately. You write a proposal when a client or potential client wants to know how you would handle a specific project. The proposal, also called a statement of work (S.O.W.), includes a proposed course of action, timing and budget. It does not include getting down on one knee. #KaepernickCouldDoIt

The Conversation

Earlier this week I was telling my wife about an exciting new proposal that we were working on. My 9-year old son Magnus overheard the conversation. Mostly because I wanted him to overhear the conversation. #sneakydadlessons

When I tucked Magnus into bed that night he asked me, ‘Dad, is someone really going to pay your business Vague Large Sum of Money? I was glad he asked. Because his interest gave me a perfect opportunity to share a lesson…

The Bedtime Story

Me:  Yes Magnus. Someone is really going to pay us Vague Large Sum of Money. But there is more to it that you should understand. Remember when we went to Dallas during spring break last year? And on the last day we went to Dunkin Donuts?

Magnus:  Yes.

Me:  Remember after we ate donuts, Mom dropped me off to have chocolate milk with my friend? Then Mom took you, Ava and Johann to some shops and to that park nearby where you played on that long horned cow statue?

Magnus: Yes.

Me: Well, after my friend and I caught up on what had happened over the past 13 years since we had last seen each other, he said, ‘I could use your help on some projects I am working on.’

Then he called me after we got home from vacation, and we set up a video conference meeting between our teams. We did 3 small projects together. And they really liked how those projects went. So they asked us to do more work for them. And we did a good job on those project too.

Because we did a good job on all those projects, now they are going to give us Vague Large Sum of Money to do an even larger project.

But, think of that money as a loaf of bread.  They give us the whole loaf. And that is called Revenue.

But then we need to give slices of bread to the workers at The Weaponry who work on the project. And we have to give slices of the bread to the film crew and the photographers and editors who work on the project. And we have to give a slice to other companies, like the airlines and the hotels that we use when we travel to do the work.

After everyone else who works on the project gets their slices of bread, The Weaponry keeps a few slices for itself for helping to organize all of the work that needed to be done.

And those slices of bread that we keep are called profit.

Magnus: How much profit does the business keep?

Me:  We like to aim for 25%. Or 1 out of 4 dollars. So if they gave us $100 our profit would be $25.  (Profit is actually a bit more complicated, and depends on the project. But I was trying to keep things simple.)

Putting Math To Work

Magnus and I then applied the 25% rule to the Vague Large Sum of Money so that Magnus could understand what a project of that size represented after all of the work was done, and all the bills were paid.

The Lesson Learned

After completing Daddy’s Bedtime Business Lesson, I asked, ‘So Magnus, what is the key lesson you learned here?’

And without a moment of hesitation, Magnus replied:

‘Have chocolate milk with your friends.’  -Magnus Albrecht (9 y/o)

Key Takeaway

Have chocolate milk with your friends. Or coffee, or beer or Kool Aid. Spend time with your people. Good things happen when you first develop and maintain good relationships. Even a 9-year old knows that.

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