Revenue, costs, and profit: the difference
Revenue is everything you collect. Costs are everything you spend to sell. Profit is what remains when you subtract the second from the first. It sounds obvious, but many people only look at revenue.
Direct costs and fixed costs
Direct costs change with each product: what you pay for merchandise or materials, packaging, and sometimes shipping. Fixed costs are paid even if you don't sell: rent, internet, subscriptions, tools.
To know what you truly earn, add both.
- Cost of merchandise or materials
- Packaging and labels
- Payment or platform fees
- Shipping you absorb
- Rent, utilities, and subscriptions
- Your time, even as an estimated salary
Calculate the margin of each product
Margin is the percentage of the price that stays as profit. The formula is: (selling price minus cost) divided by selling price, times one hundred.
For example, if something costs you 60 and you sell it for 100, you earn 40 per piece and your margin is 40 percent. Calculate it for all your products: you'll be surprised which ones leave little.
Find your break-even point
It's the amount you need to sell to cover your fixed costs. Divide your monthly fixed costs by the profit per unit. If you pay 3,000 in fixed costs and earn 40 per piece, you need to sell 75 pieces just to not lose money.
Everything you sell above that number is real profit.
Separate your money from the business money
Pay yourself a fixed salary and leave the rest in the business. Using a separate account or wallet for the business lets you see clearly each month how much comes in and goes out.
What to do if your margins are low
You have three levers: raise prices, lower costs, or sell products with better margins. Also review your bundles and discounts, which sometimes erase profit without you noticing.
Knowing your numbers gives you control: you know what to sell more of, what to stop offering, and when it's time to invest.
Do this review once a month, calmly. In a few weeks you'll make decisions with data instead of intuition.