What does that even mean? - Profit

Hate to break it to you, but if you sell $1MM of stuff, you don't get to keep all that money.

In fact, you probably won't *get* all that money.

Revenue is what we usually talk about when we talk about how big or successful our businesses are, but it's only the first part of figuring out how successful or even how healthy our situation is.

Because what do you have to do to sell that stuff?

You have to pay for marketing. Payroll and contractors. Stuff to sell, if you retail or build things. Office supplies. Business licensing and taxes. Professional services like accounting and legal help.

All those expenses come out of what you earn by selling stuff when you look at your reports.

What's left over is Profit.

So when you hear someone talk about how much Revenue they have, just take a second to ask yourself (or them!) what their *profit* on all that was. Because if they make a million but only profit $50k while you make $200k and profit $100k, who's likely better off?

But there's one more step to understanding how successful your business is *for you*, because even Profit is a "paper" number - it's primarily for accountants, managers, and, yes, the IRS. It doesn't really mean anything in the real world. You can show a Profit of hundreds of thousands of dollars and still have zero cash in the bank. You can show barely any and feel flush with money.

...Which is why the last big number you should concern yourself with is Cash Flow. That'll be my subject for next time :)