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guys hello okay so this is part two of a short video series to understand if we're gonna hire somebody new how much more sales do we really need for our company rather than using our gut we can use our financial statement or our income statement our p l okay let's go back to our example so we were going to pay a 100 000 for this new person we in our example our burden was 15 so it was an additional 15 that would pay for federal estate income taxes unemployment insurance workers comp insurance days off time off all that stuff our example is fifteen percent take a hundred thousand multiplied by one point one five hundred fifty thousand we need to know what our gross profit is which uh percentage which is our gross profit divided by our sales over the last 12 months or the last fiscal year the last 12 months the last trailing 12 months is your most accurate number i would use that okay so gross profit for the last 12 months development sales for the last 12 months whatever that number is in our example i just took a number is 35 percent your number is obviously going to be different now we take our cost 115 000 divided by gross profit as a decimal now and we found that it was 328 571. dollars in additional sales that we need to support this salary this is almost a factor of three so it's important to understand that because now you know you got to create this amount of sales to add this person because if you don't it's going to eat into your profits okay now let's look at this example and try to understand why the logic why this logic works okay so if we have a million dollars in sales and our cost of goods sold is 650 000 that leaves us with 350 000 rough color 350 000 in gross profit so this is gross profit this is our cost of goods sold and this is our sales okay so this is an example where your gross profit percentage is 35 we take our gross profit divided by our sales so if gross profit percentage is 35 so if we collect a dollar in sales and we know our cost of goods sold here in this example 65 that means 65 cents we can't use we're left with 35 cents this is our gross profit okay that means for this additional sales of 328 thousand 571 if we multiply that by 0.35 which is our gross profit percentage we're going to get our 115 000 rounded off okay so again cost of goods sold we can't use that from our collections this is gone it's gone to produce the product that's gone to produce the service we haven't the only only thing that we can do is use a remaining gross profit to pay for that employee so for a dollar worth of sales we really only have 35 cents in our example to use for any expenses and whatever's left over is our profit so hopefully that explains the logic if you have any questions post them down below now fun fact six flags theme park six flags over texas where did it get his name it represents the six flags that flew over texas at one point in time there were six countries that controlled texas so they are the kingdom of spain the kingdom of france the republic of mexico the republic of texas that can the confederate states of america and of course the usa fun fact if you enjoyed the video please like this video subscribe and share that with any other business owners that you feel might be helped by this particular information and the video series in general until next time we'll see you have a great day