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: