Episode
37
Thu, 24 Sep 2026 12:05:00 +0000
One of the biggest disconnects inside a business can be surprisingly simple:
The owner and the employees are looking at the same company but they’re seeing two completely different financial realities.
An employee might hear that the company sold a $100,000 job and think, “The owner is making a fortune.”
The owner sees something very different.
Labor. Materials. Equipment. Insurance. Vehicles. Marketing. Overhead. Rework. Taxes. And all the other expenses required to deliver the job.
Only after those costs have been paid do we discover how much profit the business actually generated.
That gap in understanding was at the heart of my conversation with Steve Baker from The Great Game of Business.
Steve shared a striking observation: the average American employee may believe a company makes around 36 cents of profit from every dollar of revenue.
Compare that with the reality for many contractors.
In our conversation, I estimated that some contractors may be operating at around 5% net profit or less, even though stronger performers may be aiming significantly higher.
That means a company operating at a 5% net profit doesn't keep 36 cents from a dollar of revenue.
It keeps a nickel.
That difference matters.
Because when employees don’t understand how money flows through the company, their everyday decisions can look very different from the decisions an owner would make.
One of my favorite concepts from The Great Game of Business is what we called the $1 exercise.
The idea is simple.
Start with $1 of revenue.
Then show your team where that dollar goes.
Some goes toward direct labor.
Some goes toward materials.
Then there are operating expenses: insurance, utilities, maintenance, professional services, vehicles, facilities and everything else required to keep the company operating.
Eventually, you reach the bottom.
What’s left?
If the business has a 5% net profit, only five cents remain.
That creates an entirely different way of thinking about expenses.
Imagine an employee wants the company to purchase a new $300 tool.
There may be an excellent reason to buy it.
But at a 5% net profit, the business needs to generate $6,000 in revenue to produce $300 in profit.
Now the team can have a better conversation.
Instead of simply asking, “Can we afford $300?” they can begin asking whether that investment will help the company generate or protect enough value to justify the expense.
Another problem is language.
People frequently use terms like revenue, margin, profit and cash interchangeably.
They aren't interchangeable.
A company can have millions of dollars in projected sales without having millions sitting in its bank account.
It can collect deposits that are ultimately needed to fulfill future work.
It can generate revenue while operating at an unhealthy margin.
And a profitable business can still face cash-flow challenges.
Owners learn these distinctions — sometimes the hard way.
But have we taught our employees the same lessons?
This is where many business owners get nervous.
“If I show my employees the numbers, won't they just leave and start their own company?”
Steve addressed that objection directly.
Teaching employees the financial fundamentals of the company does not mean giving everyone access to every piece of private financial information.
For example, Steve explained that individual salary information isn't something his organization shares.
The objective is education.
Your team should understand how the company makes money, where money goes and how their actions influence the financial result.
You're not trying to turn your employees into accountants.
You're helping them become better businesspeople.
Think about sports.
It's difficult to play a game if nobody tells you the rules.
And it's difficult to know whether you're winning if nobody keeps score.
Steve argues that business can work the same way.
When employees understand the rules, know the score and understand what's in it for them, they have a better opportunity to connect their everyday work to the outcome of the company.
Waste suddenly means something.
Rework means something.
Using the wrong materials means something.
Customer referrals mean something.
Even something as simple as taking care of equipment can be connected to a financial outcome.
Employees begin to understand why owners care about the things they care about.
Many owners say they want their employees to “think like owners.”
But there's a problem with that expectation.
Owners have information employees don't have.
We've experienced the financial consequences of decisions. We've seen the bank account. We've paid the bills. We've dealt with payroll. We've experienced cash-flow problems and watched jobs that looked profitable turn into something very different.
Then we expect employees who haven't had those experiences to somehow arrive at the same conclusions.
Maybe the first step isn't telling people to think like owners.
Maybe it's teaching them what owners know.
Give them enough financial education to understand the game.
Show them what winning looks like.
Help them connect their actions to the financial outcome.
Because when more people understand how the business actually makes money, the owner doesn't have to be the only person thinking about the business.
And that can be a powerful step toward building a stronger company.
More about Steve Baker:
Site: https://www.greatgame.com/
Youtube: https://www.youtube.com/user/GreatGameofBusiness
Instagram: https://www.instagram.com/thegreatgameofbusiness/
LinkedIn: https://www.linkedin.com/company/the-great-game-of-business/
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