LLM Book Knowledgebase

Greg Crabtree

7 min read

Greg Crabtree

Greg Crabtree is a CPA and founder of Crabtree, Rowe & Berger, PC, an accounting firm that has specialized in working with entrepreneurs and small-to-medium businesses. He is a speaker and business advisor who developed the “Simple Numbers” framework through decades of working with business owners who had revenue but not profit, growth but not cash, and high tax bills but no wealth to show for it.

Simple Numbers, Straight Talk, Big Profits! (2011) is his primary book — a practitioner’s guide to the financial metrics that actually matter for entrepreneurs. It is notable for its bluntness: Crabtree does not soften his messages about common entrepreneurial financial mistakes.

Simple Numbers, Straight Talk, Big Profits! (2011)

The Core Philosophy

“Revenue is for show, and profit is for dough.” — Greg Crabtree, Simple Numbers

This single line captures the book’s central critique. Most entrepreneurs pay too much attention to revenue as a signal of success and too little to gross profit, pretax profit, and cash. Revenue is a vanity metric without profit context.

“Keep your goal in mind: You don’t want your numbers to lie to you.” — Greg Crabtree, Simple Numbers

The Market-Based Salary Principle

Crabtree’s most counterintuitive prescription is that owners must pay themselves market-rate salaries before calculating profit:

“If you’re not able to pay yourself a market-based wage so you can see the true metrics of your business, you’re operating at a loss.” — Greg Crabtree, Simple Numbers

“You get paid a salary for what you do, and you get a return on what you own.” — Greg Crabtree, Simple Numbers

Most owner-operators pay themselves below market to make the business look more profitable on paper. Crabtree argues this obscures reality: the business is effectively subsidized by the owner’s underpaid labor. True profitability must be measured after paying market wages for all functions, including the owner’s role.

Pretax Profit Targets

“5 percent or less of pretax profit means your business is on life support. 10 percent of pretax profit means you have a good business. 15 percent or more of pretax profit means you have a great business.” — Greg Crabtree, Simple Numbers

The conventional “breakeven” standard is dismissed:

“The standard definition is when the business has income that equals its expenses. At my firm, we discovered that the breakeven concept is a flawed way of thinking. By the time you’re at the breakeven point, your business is already dead.” — Greg Crabtree, Simple Numbers

Accounting breakeven ignores the return that justifies the owner’s risk. True economic health requires profit above the cost of capital and above the risk premium of entrepreneurship.

The Labor Efficiency Metric

“Focus on your gross profit per labor dollar as your key indicator for labor productivity.” — Greg Crabtree, Simple Numbers

“I have to get 1.00 I spend on labor to reach my profitability target.” — Greg Crabtree, Simple Numbers

This ratio — gross profit divided by total labor cost — is Crabtree’s primary operational KPI. It forces clarity about whether additional labor generates sufficient value and reveals when labor costs are eating profit without generating proportional gross margin.

The Black Hole: 5M Revenue

Crabtree identifies the growth stage where most businesses struggle:

“Between 5 million in revenue is what I refer to as the black hole. This is the time in your business growth when you’re forced to add staffing and infrastructure before you can really afford to.” — Greg Crabtree, Simple Numbers

At this scale, the business must cover eight functional areas (CEO, sales, marketing, operations, IT, finance, customer service, HR) but often cannot generate sufficient gross profit to hire all of them at market wages without squeezing the pretax margin below sustainable levels. The prescription: never add staff until pretax profit is at 15%, and never finance growth through debt.

The Core Capital Target

“Your core capital target is simply this: two months of operating expenses in cash and nothing drawn on a line of credit.” — Greg Crabtree, Simple Numbers

This is the financial safety threshold below which the business is fragile to any revenue disruption. Above it, the business can absorb normal volatility without panic decisions or debt dependence.

The four-step priority for deploying cash:

  1. Pay taxes
  2. Repay debt
  3. Reach core capital target
  4. Take profit distributions

“Cash is the most powerful opportunity magnet ever created.” — Greg Crabtree, Simple Numbers

“Businesses that have cash and no debt attract magical things.” — Greg Crabtree, Simple Numbers

Anti-Debt Philosophy

“For entrepreneurs, credit lines are the equivalent of crack cocaine — it’s that addictive. Why? Because when you draw money on a line of credit, you’ve postponed a hard business decision that should have been made a lot sooner.” — Greg Crabtree, Simple Numbers

“Do not confuse debt with capital. Capital is the cash you leave in the business to fund your receivables and inventory for normal business conditions, and debt is financing for special cases.” — Greg Crabtree, Simple Numbers

“You can’t build wealth until you get out of debt.” — Greg Crabtree, Simple Numbers

Hiring Philosophy

“Here’s what I always tell people: hire slowly, fire quickly.” — Greg Crabtree, Simple Numbers

The cost of a bad hire compounds: the direct cost of below-par productivity plus the indirect costs of team demoralization, and the eventual cost of replacing the hire — while having lost the time that should have gone into finding the right person initially.

“When you have only one technical person who is an expert (and not the CEO) the business is not vibrant enough to pay the CEO more than the expert.” — Greg Crabtree, Simple Numbers

Crabtree’s rule for CEO compensation: the CEO should normally be the highest-paid salaried employee, because they are responsible for the entire enterprise. Exceptions: high-producing salespeople on commission, and sole technical experts in early-stage businesses.

Salary Caps

Crabtree introduces the “salary cap” concept — a maximum allowable total labor expense that ensures pretax profit stays within target range. As pretax profit grows, the salary cap can be raised; as it shrinks, the cap must be enforced even if it means difficult conversations.

“Never give an employee a cost-of-living adjustment. If you do, you will have many employees asking for a salary increase based on what they need to make a living. The amount they choose to spend in their lives is not your problem.” — Greg Crabtree, Simple Numbers

Pay changes should be tied to market rates and role advancement, not to employees’ personal financial needs.

Business Valuation

“My experience has shown that the economic value of a business is typically based on the last three years of pretax profit plus the equity (assets minus liabilities) in a business.” — Greg Crabtree, Simple Numbers

The five value drivers: customers, employees, processes and know-how, core capital, and intellectual property. Each is a facet of sustainable profitability.

The Reporting Cadence

Daily: Cash balance (simple enough to read on a phone) Weekly: Two-week cash flow forecast Monthly: P&L and balance sheet (rolling 12-month view)

“Budgeting is one of those things that can make you keep your head down when you actually need to keep your head up to see what’s coming at you. Instead, spend 25 percent of your effort looking at what has happened and 75 percent of your effort looking at numbers and thinking about what you want to make happen.” — Greg Crabtree, Simple Numbers

Practical Significance

Crabtree’s framework is particularly valuable for entrepreneurs in the 10M revenue range who have not yet installed professional financial management. His metrics are simple enough to be actionable without sophisticated financial systems, and his thresholds (10% / 15% pretax, two months cash, 1.8x gross profit per labor dollar) provide clear standards against which to benchmark.

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