It is easy to be confused as to how a company makes their money. At first glance most people would say that companies make money on the product that they sell and the service they provide. That is true, many companies make money on the product they sell and the service they provide, but for many companies the product they sell is just the way that the company raises capital to fund the way that they make money. Tesla Motors is a great example of this; most people would call Tesla a car company that is changing the way that human beings travel on earth. Tesla is changing the way that humans travel on earth in more ways than one, but that is not the reason that Tesla is in business, or how Tesla makes their money. Tesla actually an energy company, a motor vehicle company, and a company striving to create new technology.
Tesla creates the most innovative and smartest cars in the world and sells them for pretty much the price that it took to create them. They use those assets the leverage themselves to raise capital to fund the way that they make money, on energy and technological advancements that give them patents that they will be paid royalties on for a long time. Tesla is a hustler that is not a motor company but an energy company that wants to convert the world to solar power. Elon Musk is the mastermind behind this operation who plans to create cars that pay for themselves by being powered by his Gigafactories that produce solar energy, as well as solar paneled cars, which he plans to execute by 2020.
Tesla is not the only company that runs their business to fund the way that they make money. Another great example of this is McDonalds, notorious for extremely cheap food that is also extremely unhealthy. McDonalds is actually a real estate company, at least that’s how they have gained most of their wealth. If you want to know what I mean when I say this take a look at McDonalds consolidated balance sheet. More than 60% of their total assets are made up of PP&E, or property plant and equipment. McDonalds owns a lot of the most expensive real estate in the world and the appreciation of that real estate has made McDonalds one of the most successful fast food companies in the world. Although McDonalds does not receive actual cash for its real estate that it owns its value appreciates over time while McDonalds continues to make a little bit of money on their side job flipping burgers.
Understanding the true way that a company makes money is something that is often overlooked. Once you analyze a company and find the way that it makes money it is a lot easier to understand where that company is moving in the future. It can help you make decisions today with your money that could pay off to make you more money in the future. This kind of thinking has made me appreciation the McDouble and that new Tesla that is sitting in your local grocery store parking lot in a new, more lucrative way.
