Let's say you have a temp services company which just hires people, marks up their salaries by 25% and rents them out to other companies. If other expenses are minimal, then the salaries would be four times as large as the profit. You could make a lot of money that way.
Problem is labor costs arent so easy to disguise.
You could, for instance, have a construction company pull in enough money to pay labor and have nice profit because the originator of the contract pays for amd delivers materials based on the agreement between them and say, a homeowner.
Pella Windows and Home Depot do this.
The company only has $15 million in revenue. It is a processing company that sells card processing services. They get a small percentage of every card swipe.
The added cost is going to eat up virtually ALL the profit in the company. He dropped his pay from $1 Million (way too high for a company with $15 million in revenue anyway), and that will absorb some of the shock, but not all.
If I was a board member or investor, he would be out on his but quicker than poop through a goose.
People are a major expense item.
Profits, if any, are the slim slice at the bottom of the page.