How Increased Profit Doesn’t Always Mean a Healthier Business

By Andy Mulholland

He has a background in leading a top real estate team for over a decade and an understanding of the critical role of clear financials, Andy, along with his wife Ellyn, a seasoned real estate CFO, co-founded Simple-Numbers.

Growing profit doesn’t always mean a stronger business. I recently reviewed the financials of a real estate team that seemed to be on the right track. Their profit and loss statement showed their net income rising each quarter. On paper, it looked like a win, as their expenses were even decreasing. However, once I separated owner income from team income, the accurate picture emerged.

Many team leaders fall into this trap. They see net profit rising and assume the business is getting stronger. In reality, the opposite may be true. In this case, the team’s production had declined quarter after quarter, while the owner’s production had climbed. What appeared to be progress was actually the team leader working harder and taking on more of the load.

This is not the sign of a healthy business. If the goal is simply to make more money today, this might seem acceptable. However, if the goal is to build a business that operates independently of the leader’s constant production, the numbers reveal a problem. The business is becoming more dependent on the owner, not less.

The distinction between owner income and team income matters. Without separating the two, you cannot see whether the team is truly growing. A rising net profit can disguise the fact that your business model is not scaling. Over time, this creates stress, limits growth, and traps the leader in a cycle where they must keep producing just to maintain results.

Numbers are the most effective way to gain clarity. By structuring your P&L correctly and tracking the source of your income, you can determine whether your team is on or off track. If team production is shrinking, the profit number is misleading. Only by separating the sources of income can you know if you are building a real business or simply taking on more work yourself.

The cost of ignoring this distinction is significant. Leaders burn out, the team loses confidence, and long-term sustainability disappears. Correcting it starts with discipline in how you set up your financials. Use a chart of accounts that clearly separates team income from owner income. This provides you with the data you need to accurately measure the true health of your business.

A strong real estate business grows because the team produces. If your numbers show the opposite, it’s time to reassess. Net profit is not the full story. The real measure of success is whether your team can generate results without you carrying the bulk of the production.

If you want to review how to set up your numbers or see a sample chart of accounts, you can simply download our free chart of accounts to see how we set up our profit and loss for our real estate member, so they can exactly see what’s going on in their business. Gaining clarity now will prevent years of frustration later and help you build a business that lasts. If you have any questions, feel free to schedule a call with my team today.