.by Anura Guruge
We are, as I have mentioned a few times, BIG fans of the ‘Discovery Channel‘. We watch quite a few of their shows, recorded before hand, of course, to miss the interminable commercials, during our ‘family TV‘. One of the shows that I try and record each week, mainly because the kids love it, is ‘Fast N’ Loud‘. For reasons I have never worked out, given that we are not that big into cars, is why the kids like car shows — though they are very picky about which ones they do like. Fast N’ Loud they do like and watch it quite intently and they even remember what happened in prior episodes. Deanna, who used to be involved with cars and NAPA likes it, and it amazes me how easily they hack these cars since I have trouble changing light bulbs in a modern car or replacing batteries.
No doubt the show, sophomoric, increasingly scatological and prone to unnecessary crudeness (which results in Deanna prodding me in the ribs to indicate the kids should not be listening, though it is always too late by then), is entertaining. Other than somewhat sad problem that many of these car shows posses where they insist upon being destructive for the sake of being destructive, Fast N’ Loud is very entertaining.
I, as somebody who still has in theory a self-employed business and spent two decades helping tech startups, have a problem with how Richard Rawlings glibly states his PROFITS in each show.
What Rich Rawlings always calls his profits is JUST his gross profits. I don’t have a problem with that. It is just that he never clarifies that and I am sure leads many, many people with the wrong assumptions.
And that is my concern.
Gross Profits and Real Profits, i.e., Nett Profits, are, alas, two very different things.
If Gross Profits were Real Profits Amazon would be a profitable company.
That is my problem.
Lets take this weeks issue and you can watch it here.
They sold one of their 11, ultra exclusive, COPO Camaros, at auction, for $65,000. They wanted $75,000, but $65K wasn’t a bad price. Since they paid $55,000 each, for the 11 (or 12) they bought directly from GM, per Richard, and the graphic graphics they insist on using to highlight these figures, ‘they’ made a $10,000 profit on the sale. What he really should point out is that they made a $10,000 GROSS profit on the sale.
You may not appreciate this, BUT if we ever get to see his tax returns this sale, by the time it makes it to his tax return, is probably listed as a loss — and he is probably quite within his right to do so! And to me that is the nub and the rub.
I just hope that the IRS, if not the Texas State corporate tax folks, watch all these shows and reconcile them with his tax returns.
Even with the TV publicity they generate, I am not sure that they auction places let Richard sell his cars at auction WITHOUT charging him some auction fees. The last time I looked fancy auctions like the one that he went to charge upward of $1,000 just to enter a car and maybe another 7% of the sales price. So, of the $10,000 profit Richard claimed he made he probably had to part with quite a bit to the auction company before he even got his cut. And then, if nothing else, there are the transportation costs to get that car from Michigan to Texas and then to the auction. All of that eats into the so called PROFIT that he cites. And then there has to be some insurance costs. In this case lets even ignore the overhead of the shop and Richard’s time. The NETT PROFIT of this sale is nowhere even close to the $10,000 he so proudly bandied about. And that is my contention. Folks, even the kids, get the wrong impression.
In this episode they also sold a Bricklin — and I will confess I had never heard of a Bricklin, let alone seen one. He bought it for $3,000 and sold it for $6,100 and then claimed a profit of $3,1000. Yes, but that was GROSS. We saw at least two of his trained monkey mechanics working on the Bricklin ‘replacing’ the ignition and getting the car to fire. Though they are not the most professional of mechanics I have seen I doubt whether any of them work at ‘Gas Monkey‘ for minimum wage. Plus there is all the overhead of the shop — including workman’s comp, insurance and utilities. Yes, sure the Discovery Show definitely must go a long way towards offsetting some of those — but he still has some overhead. So, it would be more realistic if he pointed out that out of his $3,100 he still has to cover his wages, tools, materials, etc. etc.
It all reminds me of a faded, tattered pink slip from the London ‘Financial Times‘ I carried in my wallet for decades. It was a snippet of a story about an uneducated, school dropout cobbler, in London, who had done very well for himself. He was asked how he, a modest cobbler, had managed to do so well. He said: “I don’t know. I made my shoes. It cost me £2 to make them. I sold them at £4 and I was content making my 2% profit“.