Revenue vs Profit
Revenue is the money a business brings in. Profit is what it keeps after costs.
The distinction is one of the most important in business, because confusing the two produces serious errors. Revenue is the total money the business brings in from its sales, before costs. Profit is what the business keeps after the costs are subtracted from the revenue. The two are different: a business can bring in much revenue and keep little profit, if the costs consume the revenue, or bring in less revenue and keep more profit, if the costs are low. The owner who focuses on revenue, neglecting the costs, may pursue revenue that produces little profit; the owner who focuses on profit attends to what the business actually keeps. Understanding the distinction directs the owner toward the profit the business keeps, not just the revenue it brings in.
Business System Framework
This matters because profit, not revenue, is what the business keeps and what makes it worth owning. The owner who measures by revenue may think the business is doing well when it keeps little profit, the costs consuming the revenue. The owner who measures by profit measures what the business actually keeps, the return that makes it worth owning. Understanding the distinction directs the owner toward the profit the business keeps, the true measure of what it produces.
Why Focusing on Revenue Alone Is an Error
Focusing on revenue alone is an error because it neglects the costs that determine the profit.
Focusing on revenue alone neglects the costs. The owner who focuses on revenue alone neglects the costs that determine what the business keeps pursuing the revenue while neglecting the costs that consume it. The focus on revenue alone neglects the costs, attending to the money coming in while neglecting what determines what is kept. Focusing on revenue alone neglects the costs that determine the profit.
What Is Profit?
Focusing on revenue alone can pursue revenue that produces little profit. The owner who focuses on revenue alone may pursue revenue that produces little profit growing the revenue while the costs consume it, producing little profit despite the revenue. The focus on revenue alone can pursue revenue that produces little profit, the costs consuming it. Focusing on revenue alone can pursue revenue that produces little profit.
Why Most Businesses Fail
This is why focusing on profit, accounting for both revenue and costs, is the better approach. The owner who focuses on profit attends to both the revenue and the costs that determine it, pursuing the profit the business keeps rather than the revenue alone. The focus on profit attends to what the business keeps; the focus on revenue alone neglects what determines it. Focusing on profit, accounting for both revenue and costs, is the better approach. The Business System attends to the profit, accounting for both the revenue and the costs that determine it.
(Insert product CTA: The Business System)
Why Profit Is What Matters Most
Profit is what matters most because it is what the business keeps and what makes it worth owning.
Profit is what the business keeps. The profit is what the business keeps after the costs the return after all the costs of producing the value and running the business. The profit is what the business keeps, the return after the costs. Profit is what the business keeps after costs.
What Is Profit?
Profit is what makes the business worth owning. The profit what the business keeps is what makes the business worth owning, the return on building and running the business. The business that keeps profit is worth owning; the business that keeps no profit produces no return. Profit is what makes the business worth owning, the return the business keeps.
What Is A Business?
This is why profit, not revenue, is what matters most. The profit is what the business keeps and what makes it worth owning; the revenue is the money coming in, which produces profit only if it exceeds the costs. The owner who attends to profit attends to what matters most; the owner who attends to revenue alone may neglect the profit that matters most. Profit, not revenue, is what matters most, what the business keeps and what makes it worth owning.
The Practical Reading
Revenue is the money a business brings in; profit is what it keeps after costs. Understanding the distinction directs the owner toward the profit the business keeps, not just the revenue it brings in.
The first move is to distinguish revenue from profit. Revenue is the money brought in before costs; profit is what the business keeps after costs. Revenue measures the money coming in; profit measures what the business keeps.
The second move is to recognize that high revenue does not mean high profit. High revenue can produce low profit if the costs consume it; lower revenue can produce higher profit if the costs are low. The costs determine what the business keeps, so the profit, not the revenue, measures it.
The third move is to recognize that focusing on revenue alone is an error. Focusing on revenue alone neglects the costs that determine the profit and can pursue revenue that produces little profit. Focusing on profit, accounting for both revenue and costs, is the better approach.
The fourth move is to recognize that profit is what matters most. The profit is what the business keeps and what makes it worth owning; the revenue produces profit only if it exceeds the costs. Attending to profit attends to what matters most.
Business System Framework
The distinction between revenue and profit is the distinction between the money the business brings in and what it keeps after costs. The owner who focuses on profit attends to what the business actually keeps and what makes it worth owning, where the owner who focuses on revenue alone may pursue revenue that produces little profit. Profit, not revenue, is what matters most what the business keeps and what makes it worth owning.
Related Reading
What Is Revenue?
What Is Profit?
Why Most Businesses Fail
Business System Framework
Featured Works
Related Reading
What Is Leadership · Authority vs Influence · Leadership Psychology
Frequently asked questions
Find answers to the most common questions about our products, shipping and returns.
What is the difference between revenue and profit?
Revenue is the total money a business brings in from its sales, before costs. Profit is what the business keeps after the costs are subtracted from the revenue. Revenue is the money coming in before costs; profit is what is kept after costs. A business can have high revenue and low profit (if costs consume the revenue), so the two are different.
Why does high revenue not mean high profit?
High revenue does not mean high profit because the costs determine what the business keeps. A business with high revenue can keep low profit if the costs consume the revenue. The costs subtracted from the revenue produce the profit, so high revenue with high costs produces low profit. The profit, accounting for the costs, measures what the business keeps, not the revenue.
Why is focusing on revenue alone an error?
Focusing on revenue alone is an error because it neglects the costs that determine the profit. The owner who focuses on revenue alone may pursue revenue that produces little profit growing the revenue while the costs consume it. Focusing on profit, accounting for both the revenue and the costs, attends to what the business actually keeps, rather than just the money coming in.
Why does profit matter more than revenue?
Profit matters more because it is what the business keeps and what makes it worth owning the return after all the costs. Revenue is the money coming in, which produces profit only if it exceeds the costs. The owner who attends to profit attends to what the business actually keeps and what makes it worth owning; attending to revenue alone may neglect the profit that matters most.
Can a business have low revenue but high profit?
Yes. A business with lower revenue can keep higher profit if the costs are low — the lower revenue brought in, but the low costs leaving much of it as profit. The profit depends on both the revenue and the costs, so lower revenue with low costs can produce higher profit than higher revenue with high costs. The profit, not the revenue, measures what is kept.
What should a business owner focus on, revenue or profit?
A business owner should focus on profit, accounting for both the revenue and the costs that determine it. Focusing on revenue alone neglects the costs and can pursue revenue that produces little profit. Focusing on profit attends to what the business actually keeps and what makes it worth owning. The owner should attend to both the revenue and the costs, which together determine the profit.
