We have talked before about how LMG makes money.
The vast majority of our revenue comes directly from our audience through sales of our products
or from watching our content, either on YouTube or over on Flowplain
where our incredible float goats subscribe for extra content, early access and perks.
The rest of it comes indirectly from our audience in the form of sponsorships and affiliate links.
And that's why when we make a decision, you are our guide.
We are laser focused on serving our audience with the products we develop and the content we create.
Which is why it's time, finally, to have the talk.
What happens to the money? How does Linus Media Group spend money?
How much of it does Linus keep? I'm gonna tell you all of it.
But first, I'm gonna need to get some money from our sponsor.
I really didn't wanna kill our accounting department
preparing this. So before we begin, I wanna acknowledge that the data that they prepared
does contain some rounding and some quick maths.
So take it for what it is. It's a big picture look at expenses
for the last couple of years with Windows of insight into the smaller details.
With that out of the way, let's begin. Across 2024 and 2025, our largest expenses,
combining for 50% of our total, were inventory purchases and people.
Now when I say inventory, that doesn't include cameras and editing workstations and that sort of thing.
I'm talking about the 4% we spend on apparel, the 8% we spend on backpacks and other gear items,
and the 14% we spend on screwdrivers and other items
to stock in our warehouses and ship around the world.
It's kind of wild to think about, right? A quarter of our expenses
are buying inventory for lttstore.com.
Now, in theory, these are sound investments that should generate profit for us.
So no big deal, right?
But nothing is a guarantee. We've had our share of duds over the years
and even for successful products, managing cash flow for a growing business
can be extremely challenging. If you buy too little, your store looks abandoned.
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
required pretty careful coordination between Creator Warehouse and our accounting department.
By the way, thank you for being part of it and don't forget to leave a review for your purchase.
We do read them and we care a lot about your feedback. The next biggest expense for LMG is people.
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.
Why don't you guys have a European distribution center?
You might ask. Well, because the distribution channels that we have now
are already 10% of our total company expenses.
Guys, storage ain't free and the people who pick your orders,
they're not free either, trust me. I hate giving couriers this 8% exactly as much as you do.
And when the time is right for us to have distribution in regions like Europe and Australia, we will do it.
But for now, we're just gonna have to keep exploring other ways to reduce our shipping costs
and improve our delivery processes for our global customers.
Another thing that I'd love to reduce but can't is selling costs at 3%.
This includes the fees that we pay for our Shopify store as well as the pound of flesh that we sacrifice
to payment processors like PayPal and Stripe. Let's see what's next.
Ah, yes, overhead, that's an expense.
Yeah, okay, it's a pretty broad term, but there are a lot of things that need to fit under this umbrella.
Our overhead category includes bank fees, insurance,
as well as company events like sports nights, quarterly department activities, summer of fun,
which is where employees get credits for group activities like meals, golf, arts and crafts, et cetera.
And of course, our epic annual Christmas party.
It also includes postage, mileage reimbursements, office supplies, janitorial services,
security, building maintenance, marketing, and charitable donations.
Utilities are also in here at about 0.3%.
And then there's R&D, which I assume includes some of the wacky equipment
that the CW team buys to develop new products. Travel comes in at about half a percent
and production purchases weigh in at around 1%.
So that's your cameras, lenses, lights, SD cards and that sort of thing.
I actually remember making a comment years ago about how cameras are not expensive,
people are expensive and people lost their freaking minds
about how out of touch I was. But this is the context, folks.
Yeah, cameras sting a little, but like software is substantially higher
at 1.5% of our yearly outlet. The biggest ones are solid works for CAD,
gorgeous for managing customer care tickets and Adobe for, well, you know this, Adobe.
Google Workspace, Microsoft Teams and ShipStation make up kind of the next tier
and then there's a bunch of smaller ones. The last two big ticket overhead items,
totaling 1.5 and 2% of our annual expenses respectively
are foreign exchange and other, which I assume is just embezzlement, as well as rent.
Hey, rent, don't you guys own your buildings?
Yes, we do. To give ourselves peace of mind and location security for the future,
we've spent a considerable amount of money over the years owning and upgrading our workspaces.
Some of these acquisitions have actually ended up being pretty solid investments, which is nice,
but others haven't, which is all besides the point right now.
The point is that Yvonne puts our offices into their own companies that for tax purposes
have to be paid to cover their own expenses, like interest on the loans that we took out
for those buildings. It does mean more paperwork, but apparently there are also liability advantages
to doing it this way. I don't pretend to fully understand it.
All right, that's overhead. Now for a fun one, capital expenditures.
Okay, it doesn't sound fun, but these are best described as large outlays of money
that don't comfortably fit into any other category, including the lab's acoustic chamber, a fire truck,
some upgrades to our set, some workshop, a three-stage cascade CPU cooler,
a 2020 Toyota Corolla for the Comet AI self-driving video,
and the YesTech LED video wall that I bought on Craigslist.
What's interesting though, is that while these high profile purchases get talked about a lot
and have big dollar values in the thumbnails, they actually make up less than 1% of our total expenses.
The same cannot be said about people. With a headcount of 120 now across our various teams,
it shouldn't be a big surprise that other than the inventory we stock,
payroll is our largest expense by a significant margin at about 25%.
Breaking this down from there was a little tricky. See, many members of our team are cross-functional.
That's to say that one day they might be evaluating a material sample for a T-shirt,
and then the next day they might be appearing on camera, explaining T-shirt materials to our Floatplane subscribers.
But the way that our payroll budget is generally broken out,
is according to the areas where people make their primary contributions.
With that in mind, the largest department is called internal shared services.
With multiple companies, we could have separate HR, accounting, events,
infrastructure, logistics, and operations departments for each company,
but that would be horribly inefficient. So instead, we share all of those departments.
The biggest one is operations at a little over 11% of our payroll for 2025.
That's so large because it happens to include multiple top executives,
and it also serves as a bit of a catch-all for things like events, community management, and HR.
The other half is made up of accounting, IT infrastructure, and logistics.
These are the folks who get our expense reports paid on time, keep our storage servers working,
and who keep our shared office spaces equipped with peripherals.
All three of these departments are absolute heroes, and we thank you for your service.
Next up is developers, developers, developers, developers.
No one else? Okay, fine. The point is we have a ton of developers now,
handling everything from Floatplane.com to LTTstore.com to LTTlabs.com to internal tools
and weird experiments. Hey, remember the time our dev team
built a VPN product in a weekend, and then we got cold feet
around the legal and ethical concerns? These guys, absolute heroes too.
It is worth noting that this one is a little funky though, because Luke is in here and he is not a developer.
He manages developers, but then he also manages the Labs testing team,
and he appears on camera and is just, you know, generally a chad, so as you'd expect,
he inflates the numbers here a little bit. The next several departments,
each land in the 10 to 15% range,
starting with writing. These are probably the folks that you know the best.
We call them writers, but it's kind of YouTube industry lingo
for a bit of writing, a bit of production planning, a bit of hosting,
a bit of, sorry, I'm doing what today? Okay. And then next up is production,
another department of unsung heroes. Though with that said,
I actually kind of love it when they sing a little, whether that's our camera operators jumping in
to ask the question that everyone's thinking, or our editors adding their customary 15 pieces of flair
to our videos for you guys to pause and appreciate. Product design, which includes graphic design,
fashion and engineering, has become a major group for us over the last couple of years.
These are the folks that bring the many products you enjoy on lttstore.com to life,
obsessing over every detail from the sound of the ratchet to the hand feel of a design
printed on one of our high quality garments. In some cases, this team also gets tasked
with taking our product ideas behind the barn. That was a fun video, by the way,
and is totally worth a watch to get some insight into how these folks work.
Finally, there's operation staff and management specifically for lttstore.com.
These are more unsung heroes, working on everything from customer care
to compliance to supply chain management and marketing.
These are the folks who helped us weather some major storms this year
by rolling out a US based warehouse in a matter of months
after a certain person enacted a bunch of import taxes on Americans.
And then they also had to manage the fallout around moving fast and breaking stuff.
Our two smallest groups in 2025 at under 10% each are the Labs team
who handles product testing and is quietly working in the background
to scale up our processes, while also making growing contributions
directly to the content, as well as our partnerships team,
which includes Bizneyland, who handles brand partnerships
and brought you mega bangers this year, ranging from AMD ultimate tech upgrade
to that incredible tour that we did of Kyoksia's fab in Japan,
along with our amazing procurement team who I think can buy anything.
I mean, they barely even raised an eyebrow when I asked for a fire truck.
So that's it. That's who gets paid, but how are they paid?
Well, while we don't always get things perfect, what I can confidently say
is that LMG delivers on our goal of median salaries
that are well above what's typical for our region. In 2024, including only employees
who were active for the full year, LTTstore.com, in 2024,
including only employees who were actually active for the full year,
we landed at around $73,500 Canadian dollars.
And that was higher than even the average income in our area at that time.
Then in 2025, we increased our median salary
to just over $80,000 Canadian dollars. This 9% change was made
in spite of actually flat revenues across those years
to hire and retain key talent, as well as to better support our valued team members
through the current cost of living crisis. It was also partly driven
by the internal minimum wage guidelines that we have for entry-level positions.
It is separate from the legal limit and instead is tethered
to the published Greater Vancouver Living Wage, which is designed as the hourly rate
that a full-time worker must earn in order to cover essential expenses,
avoid chronic financial stress, and to participate in their community.
Furthermore, it is worth noting that unlike many gig-based productions,
we hire the vast majority of our local team members as full-time employees,
which here in BC affords them protections and benefits
that are not the norm for contractors, and for that matter,
not the norm for anyone in many other parts of the world.
We also offer a benefits package that includes retirement savings matching,
continued education, health and dental, and budgets for extras like counseling and physiotherapy.
Also, now that more members of our team are having kids, we recently added partial coverage for orthodontics.
I know that there will be many LMG team members, both current and former, watching this video.
And I'm sure this talk of company compensation is going to raise some questions for some of you.
But what I hope is that this degree of transparency
will answer at least some of them. And if you still have concerns
or you're looking for ways to improve your pay, it might be time for a conversation
about either performance or a role change.
We post all open positions on LinusMediaGroup.com and you can always speak with your manager or with HR
about how to boost your total compensation. We're working on a system, by the way,
for quantifying some of the previously intangible qualities
that have led to people with similar job titles making different amounts,
and we're hoping to roll that out shortly. Moving on to average salaries.
Naturally, these end up higher than median salaries
since you're going to have outliers like top executives that skew the data.
But they don't skew things as much as you might think.
In the last year, we have focused on improving compensation for our individual contributors
and have made only small adjustments to leadership.
This is reflective of a recent period of flat revenue growth
and hopefully is a trend that we can work to improve for 2026.
Average salaries across our companies then were 114,000 Canadian and 115,000 Canadian
for 2024 and 2025 respectively. Another key metric that people look at to determine fairness
is the relative compensation of executives
and individual contributors. And I'm going to do my best to give you guys some insight here,
but calculating this ratio is a little bit complicated for us.
See, Yvonne and I have each paid ourselves $121,000 a year
for years. Why that number? I have no idea, but as the also shareholders of the company,
it's obviously not our entire take home. So then we could remove ourselves as weird outliers,
but then we'd be sharing an average of like four people,
which is basically just outing their salaries. So what I've opted to do instead
is to just semi out one person, Taryn.
Our CEO to median pay ratio is somewhere in the range of five to one and 10 to one.
Okay, it's a pretty big range, but for the purposes of this fireside chat,
I don't think that really matters. The point is that it's reasonable.
Even by 1970s standards before executive compensation went,
cray-cray at the expense of the worker, that kind of a ratio was commonplace.
Now it is worth noting that Taryn's been on the job for a few years now, and there are plans
to tune his comp package in the near future if we execute well on our plans for 2026,
but I can only tell you guys what is, not what maybe will be,
which brings us to the five foot one inch elephant in the room, this guy.
At this point, I'm addressing our team as much as the audience, so I'll be direct.
In 2025, our tax installments were just shy
of 8% of our total expenses, and the last 15 or so percent is our net profit.
Is it a lot of money? Yes, but from an objective standpoint,
it's not outside of the reasonable range if you consider the whole picture.
And if anything, my intention is to find new revenue opportunities or efficiencies
that will push that into the 20% range. Why?
Because that bucket isn't just fun money for Linus and his family, for starters,
it includes setting aside any capital that Yvonne and I,
with consultation from our executive team, might put aside to invest in new projects,
such as the upcoming series, buying and renovating a tech house,
as well as another yet to be disclosed big content related acquisition for 2026.
It also includes maintaining our operating cash flow, as well as our rainy day fund, which, okay,
memes about my financial irresponsibility aside,
Yvonne and I have been extremely careful with our resources over the last decade plus.
We've weathered multiple major storms that have had serious business impacts
with zero layoffs, and that includes both COVID, as well as the 2023 controversy.
Now it is worth noting here that layoff has a very specific definition.
It means a reduction in force due to like a restructuring
or like a shortage of available work, which might happen someday, but it hasn't yet.
And if anyone tells you that they were laid off here, they either don't know or fully understand what happened,
or they are not telling you the whole story. The last thing that our careful financial planning
has enabled us to do is never bring in outside investors,
which can be okay, but it can also carry the risk
of enshridifying our jobs and our content. Finally, yes, this pool does include paying dividends
to our shareholders, that's me and Yvonne. And this is where the lines get really blurry.
For one thing, if I were to issue a dividend
to myself, for example, I can't just give myself money from that bucket.
I'm gonna have to pay personal income tax on top of the corporate income tax that I already paid.
So that slice of the pie, it's not actually as big as it looks
if I wanted to use it personally. And then the other thing blurring the line
is that any shareholder dividend that I wanted to issue to myself,
it wouldn't just be a payout for the ongoing investment into the company.
It would also include whatever the company decides that I'm worth for being our primary on-screen talent,
creative director for our physical goods business as well as a top-level executive.
How do you quantify what each of these is worth? How do you quantify what they're all worth together?
Am I worth millions of dollars a year? Can anyone be worth that much?
I don't know. I could compare against other recognizable hosts
where, yeah, okay, doesn't look that ridiculous. But then realistically, I'm not as good as them.
But then on the other hand, Yvonne and I provided our own seed capital for this company
without even so much as a bank loan. They didn't have to go through that. So it's a tough question to answer.
On the one hand, it sounds like a lot because it is.
But on the other hand, this is it. This is the pot at the end of the rainbow
in a capitalist system that we didn't choose, but do have to operate in.
Yvonne and I took a big risk, both providing capital to grow this thing
and working our butts off alongside the world-class team that we build.
We beat the odds. And we're also making concrete efforts not to pull the ladder up behind us.
If you did the same thing, I'd want you to have the same reward. It's a hard truth to swallow,
but a wage will always have a ceiling.
The ceiling of how much someone's willing to pay, which is dictated or at least strongly influenced
by a market that is cutthroat by its very nature.
By contrast, the ceiling for entrepreneurship,
that's however high you can build it. It is worth noting by the way though,
that while entrepreneurship is a great way to elevate your earnings,
I am not saying anything about what it'll do to the quality of your life or your peace of mind.
There are pros and cons to every path and over a decade of being self-employed,
I've learned that there is nothing wrong with choosing employment either.
Whatever path our team members choose, we want to be part of their road to success though.
And we're putting that desire into action. Recently, we've taken steps to relax our policies
around content creation side hustles, even in competitive verticals,
and we've even taken the unprecedented step of directly sponsoring former team members
who we feel are doing great work and who have strong brand synergy.
I am so proud to be a part of the teams that work here,
but I don't know. Recently, I've begun to think that maybe my greatest legacy
could end up being the incredible pipeline that we've built for developing talent,
and then the future success of ex-LMGers.
Whatever it ends up being, I'm excited to build it together
as long as it can be done while also respecting the company's need to grow
and protect both its own people and its own interests. So it's important to note that with that in mind,
we've reserved the right to reevaluate our policies as things evolve.
Constant change is just part of the game, you know? And you know what else is part of the game?
The segue to our sponsor. If you guys enjoyed this video,
why not go check out How Does LMG Make Money if you missed it?
It's changed a lot over the years, so it's kind of worth watching the whole free video series.