Business is a game. And like any game, most of us like to know the score— ’cause that’s how you know how games are won or lost. And business is a lot like that. But many business owners don’t look at the scoreboard. They don’t even know what numbers should be on the scoreboard (and what numbers are on the scoreboard)
They say “The bottom line is everything when running a business” or is it top line? One of the most crucial business indicators is the top line (Revenue) and the bottom line (Profit). There’s a good reason why it appears that business owners are fixated on these important numbers.
Both revenue and profit are indicators of a business’ income, but how do they vary and how do they affect your business’ performance?
Revenue or Gross Profit is the big one. It’s the total income generated by the business before any expenses are deducted. It’s often called “the top line” because it is the big number at the top of the business’s profit and loss statement.
The financial health of a business cannot be determined only by looking at the revenue. However, your revenue patterns are a great way to gauge growth, assess its position in the market, and do other crucial analysis. If you run a business, you should know your business revenue.
Profit or Net Profit tells you how much money you’ve earned in an accounting period after expenses have been paid out.
For small to mid sized business owners, if you’re only going to pay attention to one number in your business finances then it should be profit. The higher the profits, the more money you make.
It is a good practice to analyse these numbers once a month so you can monitor your expenses and reduce them to increase profit. Through looking at these numbers, you can also identify at what period you tend to have less work and less money so you know when to ramp up your sales efforts.
If you’re planning on improving your business, join us in our Plan For Profit workshop this 3rd February 2023 at Hamilton Hotel QLD. Claim your free tickets here.