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We have talked before about how LMG makes money.

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The vast majority of our revenue comes directly from our audience through sales of our products

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or from watching our content, either on YouTube or over on Flowplain

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where our incredible float goats subscribe for extra content, early access and perks.

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The rest of it comes indirectly from our audience in the form of sponsorships and affiliate links.

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And that's why when we make a decision, you are our guide.

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We are laser focused on serving our audience with the products we develop and the content we create.

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Which is why it's time, finally, to have the talk.

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What happens to the money? How does Linus Media Group spend money?

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How much of it does Linus keep? I'm gonna tell you all of it.

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But first, I'm gonna need to get some money from our sponsor.

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I really didn't wanna kill our accounting department

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preparing this. So before we begin, I wanna acknowledge that the data that they prepared

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does contain some rounding and some quick maths.

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So take it for what it is. It's a big picture look at expenses

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for the last couple of years with Windows of insight into the smaller details.

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With that out of the way, let's begin. Across 2024 and 2025, our largest expenses,

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combining for 50% of our total, were inventory purchases and people.

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Now when I say inventory, that doesn't include cameras and editing workstations and that sort of thing.

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I'm talking about the 4% we spend on apparel, the 8% we spend on backpacks and other gear items,

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and the 14% we spend on screwdrivers and other items

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to stock in our warehouses and ship around the world.

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It's kind of wild to think about, right? A quarter of our expenses

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are buying inventory for lttstore.com.

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Now, in theory, these are sound investments that should generate profit for us.

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So no big deal, right?

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But nothing is a guarantee. We've had our share of duds over the years

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and even for successful products, managing cash flow for a growing business

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can be extremely challenging. If you buy too little, your store looks abandoned.

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You buy too much and you might be short on money for payroll. The big load in that we had for Black Friday this year

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required pretty careful coordination between Creator Warehouse and our accounting department.

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By the way, thank you for being part of it and don't forget to leave a review for your purchase.

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We do read them and we care a lot about your feedback. The next biggest expense for LMG is people.

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But we'll come back to them later because I wanna dive a little bit deeper into that. So first, let's talk about product fulfillment.

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Why don't you guys have a European distribution center?

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You might ask. Well, because the distribution channels that we have now

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are already 10% of our total company expenses.

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Guys, storage ain't free and the people who pick your orders,

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they're not free either, trust me. I hate giving couriers this 8% exactly as much as you do.

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And when the time is right for us to have distribution in regions like Europe and Australia, we will do it.

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But for now, we're just gonna have to keep exploring other ways to reduce our shipping costs

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and improve our delivery processes for our global customers.

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Another thing that I'd love to reduce but can't is selling costs at 3%.

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This includes the fees that we pay for our Shopify store as well as the pound of flesh that we sacrifice

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to payment processors like PayPal and Stripe. Let's see what's next.

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Ah, yes, overhead, that's an expense.

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Yeah, okay, it's a pretty broad term, but there are a lot of things that need to fit under this umbrella.

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Our overhead category includes bank fees, insurance,

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as well as company events like sports nights, quarterly department activities, summer of fun,

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which is where employees get credits for group activities like meals, golf, arts and crafts, et cetera.

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And of course, our epic annual Christmas party.

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It also includes postage, mileage reimbursements, office supplies, janitorial services,

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security, building maintenance, marketing, and charitable donations.

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Utilities are also in here at about 0.3%.

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And then there's R&D, which I assume includes some of the wacky equipment

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that the CW team buys to develop new products. Travel comes in at about half a percent

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and production purchases weigh in at around 1%.

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So that's your cameras, lenses, lights, SD cards and that sort of thing.

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I actually remember making a comment years ago about how cameras are not expensive,

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people are expensive and people lost their freaking minds

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about how out of touch I was. But this is the context, folks.

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Yeah, cameras sting a little, but like software is substantially higher

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at 1.5% of our yearly outlet. The biggest ones are solid works for CAD,

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gorgeous for managing customer care tickets and Adobe for, well, you know this, Adobe.

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Google Workspace, Microsoft Teams and ShipStation make up kind of the next tier

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and then there's a bunch of smaller ones. The last two big ticket overhead items,

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totaling 1.5 and 2% of our annual expenses respectively

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are foreign exchange and other, which I assume is just embezzlement, as well as rent.

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Hey, rent, don't you guys own your buildings?

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Yes, we do. To give ourselves peace of mind and location security for the future,

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we've spent a considerable amount of money over the years owning and upgrading our workspaces.

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Some of these acquisitions have actually ended up being pretty solid investments, which is nice,

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but others haven't, which is all besides the point right now.

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The point is that Yvonne puts our offices into their own companies that for tax purposes

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have to be paid to cover their own expenses, like interest on the loans that we took out

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for those buildings. It does mean more paperwork, but apparently there are also liability advantages

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to doing it this way. I don't pretend to fully understand it.

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All right, that's overhead. Now for a fun one, capital expenditures.

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Okay, it doesn't sound fun, but these are best described as large outlays of money

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that don't comfortably fit into any other category, including the lab's acoustic chamber, a fire truck,

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some upgrades to our set, some workshop, a three-stage cascade CPU cooler,

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a 2020 Toyota Corolla for the Comet AI self-driving video,

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and the YesTech LED video wall that I bought on Craigslist.

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What's interesting though, is that while these high profile purchases get talked about a lot

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and have big dollar values in the thumbnails, they actually make up less than 1% of our total expenses.

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The same cannot be said about people. With a headcount of 120 now across our various teams,

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it shouldn't be a big surprise that other than the inventory we stock,

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payroll is our largest expense by a significant margin at about 25%.

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Breaking this down from there was a little tricky. See, many members of our team are cross-functional.

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That's to say that one day they might be evaluating a material sample for a T-shirt,

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and then the next day they might be appearing on camera, explaining T-shirt materials to our Floatplane subscribers.

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But the way that our payroll budget is generally broken out,

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is according to the areas where people make their primary contributions.

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With that in mind, the largest department is called internal shared services.

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With multiple companies, we could have separate HR, accounting, events,

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infrastructure, logistics, and operations departments for each company,

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but that would be horribly inefficient. So instead, we share all of those departments.

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The biggest one is operations at a little over 11% of our payroll for 2025.

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That's so large because it happens to include multiple top executives,

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and it also serves as a bit of a catch-all for things like events, community management, and HR.

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The other half is made up of accounting, IT infrastructure, and logistics.

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These are the folks who get our expense reports paid on time, keep our storage servers working,

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and who keep our shared office spaces equipped with peripherals.

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All three of these departments are absolute heroes, and we thank you for your service.

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Next up is developers, developers, developers, developers.

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No one else? Okay, fine. The point is we have a ton of developers now,

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handling everything from Floatplane.com to LTTstore.com to LTTlabs.com to internal tools

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and weird experiments. Hey, remember the time our dev team

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built a VPN product in a weekend, and then we got cold feet

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around the legal and ethical concerns? These guys, absolute heroes too.

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It is worth noting that this one is a little funky though, because Luke is in here and he is not a developer.

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He manages developers, but then he also manages the Labs testing team,

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and he appears on camera and is just, you know, generally a chad, so as you'd expect,

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he inflates the numbers here a little bit. The next several departments,

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each land in the 10 to 15% range,

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starting with writing. These are probably the folks that you know the best.

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We call them writers, but it's kind of YouTube industry lingo

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for a bit of writing, a bit of production planning, a bit of hosting,

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a bit of, sorry, I'm doing what today? Okay. And then next up is production,

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another department of unsung heroes. Though with that said,

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I actually kind of love it when they sing a little, whether that's our camera operators jumping in

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to ask the question that everyone's thinking, or our editors adding their customary 15 pieces of flair

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to our videos for you guys to pause and appreciate. Product design, which includes graphic design,

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fashion and engineering, has become a major group for us over the last couple of years.

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These are the folks that bring the many products you enjoy on lttstore.com to life,

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obsessing over every detail from the sound of the ratchet to the hand feel of a design

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printed on one of our high quality garments. In some cases, this team also gets tasked

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with taking our product ideas behind the barn. That was a fun video, by the way,

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and is totally worth a watch to get some insight into how these folks work.

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Finally, there's operation staff and management specifically for lttstore.com.

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These are more unsung heroes, working on everything from customer care

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to compliance to supply chain management and marketing.

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These are the folks who helped us weather some major storms this year

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by rolling out a US based warehouse in a matter of months

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after a certain person enacted a bunch of import taxes on Americans.

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And then they also had to manage the fallout around moving fast and breaking stuff.

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Our two smallest groups in 2025 at under 10% each are the Labs team

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who handles product testing and is quietly working in the background

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to scale up our processes, while also making growing contributions

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directly to the content, as well as our partnerships team,

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which includes Bizneyland, who handles brand partnerships

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and brought you mega bangers this year, ranging from AMD ultimate tech upgrade

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to that incredible tour that we did of Kyoksia's fab in Japan,

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along with our amazing procurement team who I think can buy anything.

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I mean, they barely even raised an eyebrow when I asked for a fire truck.

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So that's it. That's who gets paid, but how are they paid?

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Well, while we don't always get things perfect, what I can confidently say

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is that LMG delivers on our goal of median salaries

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that are well above what's typical for our region. In 2024, including only employees

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who were active for the full year, LTTstore.com, in 2024,

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including only employees who were actually active for the full year,

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we landed at around $73,500 Canadian dollars.

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And that was higher than even the average income in our area at that time.

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Then in 2025, we increased our median salary

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to just over $80,000 Canadian dollars. This 9% change was made

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in spite of actually flat revenues across those years

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to hire and retain key talent, as well as to better support our valued team members

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through the current cost of living crisis. It was also partly driven

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by the internal minimum wage guidelines that we have for entry-level positions.

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It is separate from the legal limit and instead is tethered

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to the published Greater Vancouver Living Wage, which is designed as the hourly rate

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that a full-time worker must earn in order to cover essential expenses,

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avoid chronic financial stress, and to participate in their community.

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Furthermore, it is worth noting that unlike many gig-based productions,

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we hire the vast majority of our local team members as full-time employees,

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which here in BC affords them protections and benefits

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that are not the norm for contractors, and for that matter,

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not the norm for anyone in many other parts of the world.

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We also offer a benefits package that includes retirement savings matching,

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continued education, health and dental, and budgets for extras like counseling and physiotherapy.

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Also, now that more members of our team are having kids, we recently added partial coverage for orthodontics.

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I know that there will be many LMG team members, both current and former, watching this video.

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And I'm sure this talk of company compensation is going to raise some questions for some of you.

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But what I hope is that this degree of transparency

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will answer at least some of them. And if you still have concerns

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or you're looking for ways to improve your pay, it might be time for a conversation

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about either performance or a role change.

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We post all open positions on LinusMediaGroup.com and you can always speak with your manager or with HR

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about how to boost your total compensation. We're working on a system, by the way,

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for quantifying some of the previously intangible qualities

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that have led to people with similar job titles making different amounts,

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and we're hoping to roll that out shortly. Moving on to average salaries.

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Naturally, these end up higher than median salaries

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since you're going to have outliers like top executives that skew the data.

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But they don't skew things as much as you might think.

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In the last year, we have focused on improving compensation for our individual contributors

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and have made only small adjustments to leadership.

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This is reflective of a recent period of flat revenue growth

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and hopefully is a trend that we can work to improve for 2026.

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Average salaries across our companies then were 114,000 Canadian and 115,000 Canadian

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for 2024 and 2025 respectively. Another key metric that people look at to determine fairness

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is the relative compensation of executives

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and individual contributors. And I'm going to do my best to give you guys some insight here,

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but calculating this ratio is a little bit complicated for us.

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See, Yvonne and I have each paid ourselves $121,000 a year

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for years. Why that number? I have no idea, but as the also shareholders of the company,

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it's obviously not our entire take home. So then we could remove ourselves as weird outliers,

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but then we'd be sharing an average of like four people,

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which is basically just outing their salaries. So what I've opted to do instead

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is to just semi out one person, Taryn.

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Our CEO to median pay ratio is somewhere in the range of five to one and 10 to one.

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Okay, it's a pretty big range, but for the purposes of this fireside chat,

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I don't think that really matters. The point is that it's reasonable.

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Even by 1970s standards before executive compensation went,

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cray-cray at the expense of the worker, that kind of a ratio was commonplace.

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Now it is worth noting that Taryn's been on the job for a few years now, and there are plans

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to tune his comp package in the near future if we execute well on our plans for 2026,

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but I can only tell you guys what is, not what maybe will be,

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which brings us to the five foot one inch elephant in the room, this guy.

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At this point, I'm addressing our team as much as the audience, so I'll be direct.

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In 2025, our tax installments were just shy

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of 8% of our total expenses, and the last 15 or so percent is our net profit.

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Is it a lot of money? Yes, but from an objective standpoint,

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it's not outside of the reasonable range if you consider the whole picture.

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And if anything, my intention is to find new revenue opportunities or efficiencies

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that will push that into the 20% range. Why?

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Because that bucket isn't just fun money for Linus and his family, for starters,

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it includes setting aside any capital that Yvonne and I,

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with consultation from our executive team, might put aside to invest in new projects,

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such as the upcoming series, buying and renovating a tech house,

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as well as another yet to be disclosed big content related acquisition for 2026.

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It also includes maintaining our operating cash flow, as well as our rainy day fund, which, okay,

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memes about my financial irresponsibility aside,

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Yvonne and I have been extremely careful with our resources over the last decade plus.

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We've weathered multiple major storms that have had serious business impacts

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with zero layoffs, and that includes both COVID, as well as the 2023 controversy.

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Now it is worth noting here that layoff has a very specific definition.

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It means a reduction in force due to like a restructuring

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or like a shortage of available work, which might happen someday, but it hasn't yet.

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And if anyone tells you that they were laid off here, they either don't know or fully understand what happened,

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or they are not telling you the whole story. The last thing that our careful financial planning

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has enabled us to do is never bring in outside investors,

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which can be okay, but it can also carry the risk

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of enshridifying our jobs and our content. Finally, yes, this pool does include paying dividends

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to our shareholders, that's me and Yvonne. And this is where the lines get really blurry.

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For one thing, if I were to issue a dividend

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to myself, for example, I can't just give myself money from that bucket.

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I'm gonna have to pay personal income tax on top of the corporate income tax that I already paid.

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So that slice of the pie, it's not actually as big as it looks

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if I wanted to use it personally. And then the other thing blurring the line

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is that any shareholder dividend that I wanted to issue to myself,

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it wouldn't just be a payout for the ongoing investment into the company.

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It would also include whatever the company decides that I'm worth for being our primary on-screen talent,

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creative director for our physical goods business as well as a top-level executive.

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How do you quantify what each of these is worth? How do you quantify what they're all worth together?

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Am I worth millions of dollars a year? Can anyone be worth that much?

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I don't know. I could compare against other recognizable hosts

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where, yeah, okay, doesn't look that ridiculous. But then realistically, I'm not as good as them.

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But then on the other hand, Yvonne and I provided our own seed capital for this company

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without even so much as a bank loan. They didn't have to go through that. So it's a tough question to answer.

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On the one hand, it sounds like a lot because it is.

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But on the other hand, this is it. This is the pot at the end of the rainbow

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in a capitalist system that we didn't choose, but do have to operate in.

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Yvonne and I took a big risk, both providing capital to grow this thing

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and working our butts off alongside the world-class team that we build.

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We beat the odds. And we're also making concrete efforts not to pull the ladder up behind us.

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If you did the same thing, I'd want you to have the same reward. It's a hard truth to swallow,

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but a wage will always have a ceiling.

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The ceiling of how much someone's willing to pay, which is dictated or at least strongly influenced

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by a market that is cutthroat by its very nature.

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By contrast, the ceiling for entrepreneurship,

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that's however high you can build it. It is worth noting by the way though,

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that while entrepreneurship is a great way to elevate your earnings,

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I am not saying anything about what it'll do to the quality of your life or your peace of mind.

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There are pros and cons to every path and over a decade of being self-employed,

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I've learned that there is nothing wrong with choosing employment either.

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Whatever path our team members choose, we want to be part of their road to success though.

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And we're putting that desire into action. Recently, we've taken steps to relax our policies

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around content creation side hustles, even in competitive verticals,

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and we've even taken the unprecedented step of directly sponsoring former team members

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who we feel are doing great work and who have strong brand synergy.

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I am so proud to be a part of the teams that work here,

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but I don't know. Recently, I've begun to think that maybe my greatest legacy

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could end up being the incredible pipeline that we've built for developing talent,

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and then the future success of ex-LMGers.

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Whatever it ends up being, I'm excited to build it together

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as long as it can be done while also respecting the company's need to grow

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and protect both its own people and its own interests. So it's important to note that with that in mind,

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we've reserved the right to reevaluate our policies as things evolve.

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Constant change is just part of the game, you know? And you know what else is part of the game?

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The segue to our sponsor. If you guys enjoyed this video,

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why not go check out How Does LMG Make Money if you missed it?

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It's changed a lot over the years, so it's kind of worth watching the whole free video series.