Gross, Net, and What Hits Your Bank Account

There are three numbers in this business that owners use as if they were the same number. They are not. They are not even close, and only one of them is actually yours.

Number one: gross

This is the figure in every projection tool, every seller’s pitch and every Facebook post. It is also the top of a waterfall with about eleven leaks in it. Nobody banks gross.

Number two: your payout

Take one real booking. Seven nights at $180, plus a $150 cleaning fee.

Number three: what is actually yours

Keep going on that same booking. The cleaner takes $125. Laundry is about $15. Consumables — paper, coffee, soap, bags, dish pods — run about $18. Seven nights of utilities on a pool home in July is maybe $85. Your share of fixed costs for the week — HOA, insurance, taxes, pool service, software — is around $340.

A $1,410 booking. A $1,368 payout. About $785 of real margin, and your mortgage has not been paid yet.

Still with me? One more distinction and it is the one that bites hardest.

Pass-throughs, and the money that is not yours

Two things inflate every revenue report you will ever look at. The cleaning fee is one. Collected tax is the other.

Inside a $72,000 “revenue” figure you might well find $9,600 of cleaning fees and $6,400 of collected tourist tax. That is $16,000 that was never income — 22% of the number you have been quoting.

The habit that fixes this

Open a second bank account. Every time a payout lands, move the cleaning money and the tax money out of the operating account the same day. What is left in the operating account is, roughly, real.

Also defined: Gross vs. Net · Net Operating Income