• Skip to primary navigation
  • Skip to content
  • Skip to primary sidebar
  • Skip to footer

ZachEvans

Believer. Husband. Dad. Coach. Healthcare Thought-Leader. All-Around Good Guy.

  • Home
  • About
    • My Life’s To-Do List
    • Reading To My Kids
    • My Trip to England
    • My Trip to China
    • My Trip to Honduras
  • Thoughts
    • Healthcare
    • Leadership
    • Entrepreneurship
    • Technology
    • Family
    • Miscellany
  • Resources
    • Business
    • Youth Sports
    • Adoption
  • Projects
  • Contact

Financials

Marginable Revenue

April 25, 2013 by Zach Evans

There are several memorable quotes from The Princess Bride but there is one exchange that I have always loved:

Vizzini: He didn’t fall? Inconceivable.

Inigo Montoya: You keep using that word. I do not think it means what you think it means.

I have been accused, occasionally  of misusing words but I rarely make one up completely. I have been working on a new word for a while, however: Marginable Revenue.

Marginable Revenue is not the same thing as marginal revenue (which is what Google tries to suggest) nor is it the same as contribution margin. Let me explain what marginable revenue is.

I have worked for two companies that are service companies that purchase a great deal of supplies and services from sub-contractors and pass them on to their clients with zero mark-up. If we paid $1 for something then our client paid $1 for something. We made our money through administrative and program fees.

We still counted the pass-through costs as top-line revenue, however, even though they would be zeroed-out by an expense line down to the last penny. Why would we do this? It made our companies look larger than we actually were. Top-line revenues could be shown to be several times larger than what our administrative and program fees were was but our operating margins and EBITDA were minuscule.

It was an accounting trick that tired to obscure the actual operating financials of the companies. It is a tempting option but one than can render decision making more difficult than it should be. That is why I like to evaluate marginable revenue.

Marginable revenue (by my definition) only looks at top-line revenue that has margin attached to it and, therefore, could contribute to the organization’s bottom line. Any pass-through revenue would be ignored, which give a more accurate view of what is happening inside the business.

While this may mean that a company feels “smaller” than they used to, what does it really matter how much top-line revenue you have if none of that revenue carries any margin?

Filed Under: Entrepreneurship Tagged With: Entrepreneurs, Entrepreneurship, Financials, Margin, Revenue

Primary Sidebar

Subscribe to Updates

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Recent Posts

  • Favorite Coach Sayings–Even If They’re Cliche
  • Adoption Facts & Statistics
  • Where Opportunity Meets Mission
  • Middle Tennessee Outlaws vs Grassland Rampage
  • Rethinking Support

Footer

Tags

Adoption Baseball Career Careers Change Charity China Coaching Communication Costs Drive Education EHR EMR Entrepreneurs Entrepreneurship Family Healthcare HIE IT Leadership LEGO LEGOs Lipscomb Management Margin Miscellany Motivation Nashville Networking Office Perfection Privacy Productivity Projects Resources Responsibility Spending Strategy Technology Training Travel Venture Capital Waffle House Work Week

Popular Thoughts

  • Baseball Coaching Resources

Latest Tweet

  • Three of my kids had the great fortune to play in @playgrassland basketball games referred by Mr. Terry. So thankfu… https://t.co/fYDCEL0ewk February 18, 2019 3:32 AM

Connect with Me

  • Facebook
  • Google+
  • LinkedIn
  • Twitter
  • Home
  • About
  • Resume
  • Thoughts
  • Projects
  • Resources
  • Contact

Copyright © 2010-2019 Zach Evans. All Rights Reserved. Built by E6 Advisors.