Chapter Chapter 1 1 followingfollowing chapters chapters, you’,ll yo leu’arlln w leahrn wat ith taatk eits t toak egets to in getitia iln tritiacationl trac, tionhow, howto to spin up spina de up ma deand mgenand sgentrateg strya, and butegy, and build a killerild a sakillerles sateleams te. am. But asBut a firass ta stefirspt , steletp’s, sletta’rts swtaithrt wsoithm ethisomnethig mnoreg m fundaore fundamentmeal. nLetta’ls . Let’s exploreexplore the b the basic eacsiocn eocmoicsno bmehiics bndehi thinds un thiiqs unue niqeuwe nbusewin busessi nmeossd elm.odel. The New Income StatementThe New Income Statement ThereTher’s a lote’s ofa lot great of great materi maal teriouta lthere out there on sub ons csubriptionscription econ oecmoincs.om I’m ics. I’m goinggoing to sta tort thisstart d thisiscus dsisioncus bysion boili byn boilig everything everything downgn d toow an s itom aple sim fraplem efram-e - workw. Lorket’s . sLtetart’s wstithart wtwitho i ntwcoom ine costmatee mstaenttems —ent thes — old the ver oldsus ver thesus ne thew. new. Here’Hers a etra’s daitio tranaditiol pronaducl prot ducincot mince ostmatee mstaetentm thenatt theythat theyteach te inach an iy n any BusineBusiness 101ss c 101lass c(nulasmbs (nuermbs deliers ndelieatedne ain mtedillio in mnsillio): ns): Net SNetales S ales $100 $100 Cost of Goo Cost of Goods Solds d Sol(COd G(SCO) G S) (40) (40) GrossGro Incssom Inecom e $60 $60 SalesS & Malesa & Mrketianrkgeti ng (20) (20) Gener General & Aadml & inistrAdministrativeativ e (10) (10) Resear Recshear & Developch & Developmentme nt (20) (20) PrettyPretty straightfor straightforward,wa right?rd, right? This saThiyss yosayus s yooldu osolned or on me oreor m unoreits un of ita s of a productpro datuct a tot at aal totsaleal of sa $1le of00 $1 m0illion0 m.illion The .i ncTheom ince ostmatee mstaenttem bentrea kbsre oaukt s out the costthes cost thats thwent iat went into thatnto un thatit. unit. There There are foaurer f foundaur fundamentmeal cnosttals c: osts: 1. How much it took to make that unit (COGS), including the raw 1. How much it took to make that unit (COGS), including the raw materials, production costs, and so on.materials, production costs, and so on. 2. How much it took to sell that unit 2. How much it took to sell that unit — commissions to sales — commissions to sales people and money for the channel, for example.people and money for the channel, for example. 3. How much overhead management 3. How much overhead management — finance, human resources, — finance, human resources, and executives, for example and executives, for example — needed to run the company. The — needed to run the company. The more units you sell, the lower your overhead cost per unit.more units you sell, the lower your overhead cost per unit. 4. How much R&D the company is spending to create the next hit 4. How much R&D the company is spending to create the next hit product.product. The mTheoney money you reyouceived received for the for pro theduc prot,duc lesst, theless c theost cofo sthet of pro thed prod- - uct, isuct the, is grosthe sgros incoms ince,om othere, otherwise wkniseown kn oaswn the as grosthe sgros masrgi man wrgihen n when 1616 1616