Do You Really Know What Your Profit Is?

Many small business owners proudly look at their revenue numbers and think, “I’m doing great!” But here’s the truth: revenue is not profit.

Confusing the two can cause serious problems—overspending, under-saving, and ultimately stalling your growth. Let’s break this down in simple terms.

Revenue vs. Profit: What’s the Difference?

• Revenue (sales) is the total money your business brings in. Think of it as the “top line.”
• Profit (net income) is what’s left after paying all your expenses—your “bottom line.”

You can generate $500,000 in business revenue and still end the year with only $20,000 in net profit (or even a loss). Why? Because operating expenses eat into that number—payroll, rent, supplies, taxes, software, subscriptions, and countless other costs. That’s why having clean books is critical for getting a clear financial picture.

Why This Confusion Wrecks Small Business Growth

When you mistake revenue for profit, you may:

• Hire too quickly, thinking you have more budget than you actually do.
• Fail to set aside money for tax planning, leading to a nasty surprise in April.
• Take home too much in owner draws, draining your business cash flow.

On the surface, your company may look healthy. But beneath the numbers, the foundation can be shaky. This is one of the most common bookkeeping mistakes small business owners make.

How to Truly Know Your Profit

1. Track every expense carefully. Even small subscriptions add up.
2. Review your financial statements regularly. Don’t just glance at your bank balance. Learn how bookkeeping services can help.
3. Understand gross vs. net profit. Gross profit shows what you earn after direct costs (like products or labor), while net profit accounts for everything else.
4. Invest in accurate bookkeeping. Clean books are the only way to see a real picture of your finances. Use the free Clean Books Checklist to make sure your records are up to date.
5. Work with an accountant or bookkeeper. A professional can help you monitor true profit and plan for taxes.

The Bottom Line

Revenue might feel exciting, but profit is what truly fuels your business. It’s what lets you reinvest, grow, and pay yourself with confidence.

Don’t just ask, “What did I make?” Ask, “What did I keep?”
That’s the number that matters most for your business success.

Want help understanding your true profit? Get Connected with AdminBooks today for stress-free bookkeeping and tax support.