Ever feel like you’re making sales, but your bank account isn’t growing? It’s a common trap for business owners: focusing so much on the “Top Line” (your total sales) that you forget about the most important numbers in the middle.

To really master your money, you need to understand two key concepts: Gross Profit and EBITDA. Don’t let the jargon scare you; they are actually the keys to putting more cash in your pocket.

Meet the “Middle Line”: Your Path to a Payday

In the world of business, your income statement is like a sandwich. The top bun is your Revenue (everything you sold). The bottom bun is your Net Profit (what’s left at the very end).

But the “meat” in the middle is your Gross Profit, also known as the Middle Line.

This is the number that separates your Direct Costs (what it costs to actually make or deliver your product) from your Overhead (everything else, like rent and utilities).

Why does this matter to you? Because business owner compensation lives inside that “Overhead” category. If you can increase your Gross Profit by selling more or lowering your direct costs, you create a bigger pool of money to cover overhead. The bigger that pool, the more money you can actually pay yourself.

EBITDA: Seeing the “Real” Money

Once you understand your Gross Profit, the next step is looking at EBITDA. It stands for Earnings Before Interest, Taxes, Depreciation, and Amortization.

That sounds like a mouthful, but here is the simple version: it’s a way to see how much cash your business produces just by existing and doing its job.

Accountants use EBITDA to strip away the “unusual” or “discretionary” stuff:

• Interest and Taxes: These cost you cash, but they don’t actually tell you if your business model is working.

• Depreciation and Amortization: These are “non-cash” expenses. They are accounting entries that don’t actually affect your daily cash flow.

When you pull those out, you get to see the truth: How much cash does the business produce just by operating under its business model? 

The Bottom Line (For You)

If you want a healthier business and a bigger personal paycheck, stop looking only at your total sales. Start obsessing over your Middle Line and your EBITDA. When these two numbers are healthy, your business isn’t just “busy”… it’s actually making you money.