Back

Karunakar

Start, Build, Scaleย โ€ขย 5m

Revenue, Costs, and Profit: The Foundation of Business When running a business, understanding how money flows is crucial. The three essential elements are: Revenue: The total income from selling goods or services. Costs: Expenses incurred to operate the business, split into fixed and variable costs. Profit: The money left after subtracting costs from revenue. Now, letโ€™s dive into each concept through the lens of Sweet Success Cupcakes, a small bakery youโ€™ve just started. Revenue: The Starting Point Revenue is the income your business generates from sales. It depends on two factors: The price of each item. The quantity sold. Formula: Revenue=Price per Unitร—Units Sold Sweet Success Example: You sell cupcakes for $3 each. In your first week, you sell 200 cupcakes. Revenue=3ร—200=600dollars. This $600 represents the total money your customers paid. Costs: The Expenses Costs are the money you spend to keep the business running. These are divided into two categories: 1. Fixed Costs: These remain the same regardless of sales. For example: Rent for the shop: $500/month Weekly fixed cost (if divided evenly) Fixed Cost per Week= 500/4 โ€‹=125dollars. 2. Variable Costs: These depend on production or sales volume. Each cupcake costs $1 in ingredients. If you sell 200 cupcakes: Variable Costs=1ร—200=200dollars. Total Costs: The sum of fixed and variable costs: Total Costs=Fixed Costs+Variable Costs For Sweet Success in Week 1: Total Costs=125+200=325dollars. Profit: The Reward Profit is what remains after paying all costs. Formula: Profit=Revenueโˆ’Total Costs Sweet Success Example: In your first week: Revenue: $600 Total Costs: $325 Profit=600โˆ’325=275dollars. This $275 is your reward for running the business. Key Takeaways Revenue: The more you sell or the higher your prices, the greater your revenue. Costs: Understanding and managing fixed and variable costs is critical to maintaining profitability. Profit: Maximizing profit requires balancing revenue growth and cost control. Follow Our Medium blog for Finance and Business insights like this: https://medium.com/@FoundrBite

3 replies7 likes
1
Replies (3)

More like this

Recommendations from Medial

Harshavardhan

ย โ€ขย 

YouTubeย โ€ขย 1y

The ABCs of Entrepreneurship and Business As an entrepreneur or business professional, it's important to have a solid understanding of key terms and concepts. Here are some essential terms you should know: 1. Profit Margin: - Formula: Profit Margi

See More
0 replies14 likes
12

Amanat Prakash

Building xcesย โ€ขย 1m

Day 4 Business Terms Contribution Margin โ€“ The Profit Clue Most Businesses Ignore Most founders talk about revenue and profitโ€ฆ but ignore what really drives profitability: Contribution Margin. What is it? Contribution Margin = Revenue โ€“ Variable C

See More
0 replies1 like
Image Description
Image Description

SHIV DIXIT

CHAIRMAN - BITEX IND...ย โ€ขย 4m

๐Ÿ’ฐLearn Start-up Maths โ€”( Concept - 2 )๐Ÿ“Š ๐Ÿ’ฑ All details about โ€œ COST โ€ Whenever someone asks you about the cost just tell him that โ€œ Cost the amount of money that a business spends on the creation of something โ€ โ€ข There are many types of cost #

See More
14 replies28 likes
17
Image Description

Amanat Prakash

Building xcesย โ€ขย 1m

Day 1 Business Terms 1. Revenue vs. Profit โ€“ "Revenue is what you earn, profit is what you keep. A startup making โ‚น10L/month in revenue but spending โ‚น9.5L has only โ‚น50K profit. See the difference?" 2. Burn Rate โ€“ "How fast are you burning cash? I

See More
1 replies10 likes
4

Somraj

ย โ€ขย 

Finicateย โ€ขย 1y

Startup Blueprint - Day 04 Business Model Refinement 1. Revenue Streams: Specify how your startup generates revenue (e.g., subscriptions, one-time sales). 2. Cost Structure: Break down fixed and variable costs (e.g., production, marketing, overhea

See More
0 replies7 likes
7
Image Description
Image Description

Arcane

Hey, I'm on Medialย โ€ขย 6m

Profitability Metrics These are the stages of profitability every founder should be familiar with (Refer the table below) In the beginning, Start with Contribution margin (CM)- measure if your revenue covers variable costs. Next, target transacti

See More
3 replies7 likes
5

Harshavardhan

ย โ€ขย 

YouTubeย โ€ขย 1y

The ABCs of Entrepreneurship and Businesses #Day 2 7. Accounts Receivable: Amounts owed to a business by customers for goods/services on credit. 8. Accounts Payable: Amounts owed by a business to suppliers/creditors for purchases on credit. 9. Gro

See More
0 replies9 likes
6

Vivek Joshi

Director & CEO @ Exc...ย โ€ขย 5d

Mastering Unit Economics Unit economics isnโ€™t just a metricโ€”itโ€™s your startupโ€™s financial DNA. It reveals whether each customer adds value or drains cash. Hereโ€™s how to build your unit economics from scratch: 1. Define Your Economic Unit What drives

See More
0 replies3 likes
Image Description
Image Description

Yash Barnwal

Gareeb Investorย โ€ขย 7m

The image summarizes NVIDIA's revenue breakdown, showing $30B in total revenue, with significant contributions from Data Center ($26.3B) and Gaming ($2.9B), alongside impressive profit margins. ๐Ÿ”ฅ๐Ÿ”ฅ๐Ÿ”ฅ

6 replies25 likes
18
Image Description
Image Description

Ronak Patel

Here you go!ย โ€ขย 10m

Wth is CM1, CM2???? CM - Contribution Margin Contribution margin is the selling price per unit minus the variable cost per unit. CM1 = Contribution margin one= selling price- material costs - logistics costs. CM2= Contribution margin two= sellin

See More
9 replies12 likes
5

Download the medial app to read full posts, comements and news.