revenue – Dispatches From The Front

There’s a bit of a tendency to think that successful entrepreneurs go mostly by instinct, confidence, and a few big ideas thrown in, and although those things do absolutely play a role, they’re not usually what keeps a business going for the long term. In fact, if you want a long-lasting business, the one thing you’ve definitely got to do is watch the numbers – get those right and the rest should fall into place. With that in mind, keep reading to find out more about financial diligence.

Revenue Is Only Part Of The Story

Revenue is generally the part of the business people can see, and it’s also the one that feels the most rewarding to track, but the truth is that revenue on its own doesn’t tell you whether the business is healthy, and what matters just as much is how much of that revenue is still there once all the expenses are accounted for, and whether those expenses are rising (perhaps without anyone noticing).

For example, if advertising costs increase, or supplier fees edge up, or operational costs creep higher month after month, your revenue can still grow, but your margins might be shrinking at the same time, and that’s the kind of situation that leaves business owners confused because things are tighter than they should be – as far as they’re aware, anyway. But entrepreneurs who review their financial data on a regular basis are far more likely to catch those changes early on, so they’ll be able to adjust pricing, renegotiate contracts, or cut back on spending before it all becomes a much bigger issue.

Making more profit is NOT the same as generating more revenue.

They are two completely different areas, and something that I see very little discussion on.

Sure, I see LOTS of talk about revenues, i.e. six-figure businesses, multi-six-figure businesses, seven-figure businesses, but you never seem to get to the real story behind these headlines – how much profits are they really making? How much of the $100k does the business owner actually get to keep once expenses are paid — that’s the profit!

A six- or even seven-figure business sounds great, but it’s not so great if the profits aren’t there, i.e. you’re only making a $10k profit from a $100k business.

Profits are basically what’s left over (pre-tax or gross) after a business’ expenses have been deducted from its revenues – and this is one area of business that you need to keep a close eye on. So, taking two different scenarios, let’s look at some simple math in determining the profits of a six-figure business and a smaller five-figure business:

Tag: revenue

Why Smart Entrepreneurs Watch the Numbers | The Startup Magazine

Creating More Profits: 3 Essential Areas to Focus On | Getentrepreneurial.com