\n\n\n\n
Q: When considering profit vs. revenue, what should my business be the most concerned about?<\/strong><\/p>\n\n\n\n A: <\/strong>Revenue is the money that your business is generating, whereas profit is the money left over after accounting for operating costs. Because your business\u2019s revenue can be reinvested into your business, it\u2019s best to focus on generating revenue before profits. <\/p>\n\n\n\n It\u2019s no secret that most Americans are wary<\/a> of the country\u2019s economic woes. <\/p>\n\n\n\n While some might chalk up this wariness to stagnant wages<\/a>, country-wide fears of an economic recession<\/a>, or a shift in worker consciousness<\/a>, the truth is a bit more nuanced. <\/p>\n\n\n\n From frustrations with corporate tax rates<\/a> to skepticism about the fairness of the entire system, our views on the country\u2019s financial policies are constantly evolving. For this reason, we can\u2019t attribute this general unease to one factor alone. <\/p>\n\n\n\n Fortunately, despite this overwhelmingly negative outlook, modern technological advancements have provided entrepreneurs with an easy way to start digital businesses of their own<\/a>. <\/p>\n\n\n\n Similarly, these advancements allow established business owners to revitalize or refocus their online operations whenever they see fit. <\/p>\n\n\n\n To make the most of this streamlined approach to digital businesses, it\u2019s important to understand the differences between profit vs revenue and, perhaps more importantly, leverage<\/em> these differences. <\/p>\n\n\n\n Sure: <\/p>\n\n\n\n Most business owners are aware of the general differences between profit vs revenue vs income<\/strong>. <\/p>\n\n\n\n But if you dig a little deeper into the more nuanced aspects<\/a> of how each measure affects your business, you can determine which are you should focus on to build your business\u2019s long-term success. <\/p>\n\n\n\n From strategizing on profit<\/a> vs. revenue maximization to identifying your business\u2019s growth stage<\/a>, there is always more to learn and absorb when it comes to managing your company\u2019s gross income. <\/p>\n\n\n\n In this article, we\u2019ll be taking a closer look at what the definition of net profit and net revenue. <\/p>\n\n\n\n We\u2019ll also compare profit vs. revenue vs. margin <\/strong>and <\/strong>examine a few modern digital solutions. <\/p>\n\n\n\n So: <\/p>\n\n\n\n If you\u2019ve been searching for a profit vs. revenue example and keep coming up short, you\u2019re in the right place. Keep reading for more about net profit, gross income, and modern digital businesses! <\/p>\n\n\n\n <\/p>\n\n\n\n Before we dig too deeply into profit vs. revenue, let\u2019s take a moment to look at profit on its own. <\/p>\n\n\n\n Profit is the amount of money you have after subtracting the expenses associated with your business operations. Simply put, this is all the money that you have left over. <\/p>\n\n\n\n Profit is the money you\u2019re able to actively pull from. It\u2019s the money above and beyond what your business needs to break even. <\/p>\n\n\n\n Depending on what kind of business you own, your operational costs could be high or nearly nonexistent. Thanks to recent virtual solutions, modern entrepreneurs have countless options they can use to reduce operational expenses<\/a> to a fraction of their original amount. <\/p>\n\n\n\n NEXT STEPS: <\/strong>How to Reduce Operating Expenses in Business<\/a> <\/p>\n\n\n\n Even if you have high revenue, your business could still be losing money if your operational costs outweigh the money you\u2019re bringing in. <\/p>\n\n\n\n For this reason, many business owners focus heavily on profits — largely because profits are generally going to be better for your personal finances (at least in the short term). <\/p>\n\n\n\n That said, focusing exclusively on profit in an attempt to personally enrich founders or other high-ranking business members is an unsurprisingly dangerous way<\/a> to run your business. <\/p>\n\n\n\n It\u2019s important to note that profit can theoretically be reinvested, but in doing so, it becomes revenue. <\/p>\n\n\n\n There are technically a few different kinds of profit: <\/p>\n\n\n\n Gross profit is simply your business\u2019s profit minus manufacturing costs, the cost of necessary raw materials, or the cost of the products themselves. When you\u2019re calculating your business\u2019s income statement<\/a>, gross profit is the first analysis you\u2019ll make. <\/p>\n\n\n\n Fortunately, it\u2019s an easy calculation. In a given period, you just need to subtract the cost of goods sold, or COGS, from your business\u2019s total sales. <\/p>\n\n\n\n Your gross profit doesn\u2019t reflect anything outside of the profits of your products or services, so only subtract expenses that are directly related to the production or sale of your products or services. <\/p>\n\n\n\n Let\u2019s run through a quick example: <\/p>\n\n\n\n Say you\u2019ve got a business called Best Business and your total sales for the quarter are $250,000. In the same quarter, you\u2019ve spent $100,000 on the cost of goods sold, so Best Business\u2019s gross profit for the quarter is $150,000. <\/p>\n\n\n\n Once you\u2019ve determined your business\u2019s gross profit, you can figure out your net profit with ease. <\/p>\n\n\n\n While the gross profit formula doesn\u2019t account for anything outside of your company\u2019s cost of goods sold, your net profit is a more detailed reflection of your operating expenses. <\/p>\n\n\n\n Essentially, your net profit is the money left over after you\u2019ve accounted for all <\/em>operating expenses, tax considerations, and any other costs related to the running of your business. <\/p>\n\n\n\n Keep in mind that banks, other financial institutions, and investors will typically use your company\u2019s net profit to help determine how financially healthy your business is. <\/p>\n\n\n\n Now, let\u2019s take a look at how we\u2019d calculate Best Business\u2019s net profit. Thanks to the above example, we now know that Best Business\u2019s gross profit for the quarter is $150,000, so we have our starting point. <\/p>\n\n\n\n Let\u2019s say the company has spent $25,000 on payroll, $25,000 on utilities and rent, $25,000 on marketing, and another $15,000 on quarterly taxes. Next, we combine these figures to determine that Best Business has spent $90,000 on operating expenses this quarter. <\/p>\n\n\n\n Finally, we can subtract Best Business\u2019s operating expenses ($90,000) from its gross profit ($150,000) and we are left with Best Business\u2019s quarterly net profit of $60,000! <\/p>\n\n\n\n NEXT STEPS:<\/strong> Payroll Loans for Small Business: Why Your Business Credit is Crucial<\/a> <\/p>\n\n\n\n Operating profit is also known as EBIT or \u201cEarnings Before Interest and Taxes, is a worthwhile metric that is nonetheless often ignored because there usually isn’t much difference between operating profit and net profit \u2013 especially in small businesses<\/a>. <\/p>\n\n\n\n Your business\u2019s operating profit is the company\u2019s gross profits minus its operating expenses, amortization, and depreciation. This means that your company\u2019s EBIT accounts for everything except interest fees and taxes. <\/p>\n\n\n\n For companies that don\u2019t carry large loans, lines of credit, taxes, or anything incurs interest fees, operating profit isn\u2019t a very useful metric. That said, understanding how to calculate this data helps you stay informed when covering the specificities of profit vs revenue. <\/p>\n\n\n\n Technically, your business\u2019s profit before tax will be the same as your operating profit. However, profit before tax also accounts for any interest fees you\u2019re paying. <\/p>\n\n\n\n Similarly, profit after tax is effectively the same thing as net profit. However, other business owners might refer to your net profit as your profit after tax, so it helps to avoid confusion if you\u2019re familiar with both terms. <\/p>\n\n\n\n As you can see, profit might sound simple — but there\u2019s a lot going on behind the scenes. <\/p>\n\n\n\n At the end of the day, you\u2019re running a business because you want to make money<\/a>. Whether it\u2019s identifying your business\u2019s growth stage or cutting down on operational costs, there are countless ways to add to your business\u2019s income. <\/p>\n\n\n\n Your business should do everything in its power<\/a> to increase profits – but when you\u2019re focusing on scaling your company, those profits should be reinvested. <\/p>\n\n\n\n Savvy readers might recall that reinvesting those profits turns them into revenue. <\/p>\n\n\n\n You can\u2019t understand profit vs. revenue if you don\u2019t understand revenue. <\/p>\n\n\n\n Revenue is often called the \u201ctop line\u201d because it appears at the top of a profit and loss statement. <\/p>\n\n\n\n So – what is revenue? How is it different from profit? <\/p>\n\n\n\n Revenue refers to the total amount of income generated through business operations. It is a measure of the gross money made by the business through all operations. <\/p>\n\n\n\n While profit refers exclusively to the leftover money in your business, revenue refers to all<\/em> income that your business manages to secure. <\/p>\n\n\n\n Simply put: <\/p>\n\n\n\n Revenue minus expenses equals profit. <\/p>\n\n\n\n Just like profit, revenue can be broken down into more specific categories: <\/p>\n\n\n\n Operating revenue is best described as the income your business regularly generates or the sum of the cash inflow from your standard operations. <\/p>\n\n\n\n Essentially, this is the money your business makes doing what it was designed to do. <\/p>\n\n\n\n If you\u2019re running an online retailer, all of the money your business makes selling clothes online is accounted for in your operating revenue. <\/p>\n\n\n\n As you might have guessed, non-operating revenue is the revenue your business generates that isn\u2019t<\/em> related to its core operations. <\/p>\n\n\n\n Non-operating revenue is the money your business brings in while doing anything outside of what it was designed to do. <\/p>\n\n\n\n This could take the form of an investment, the sale of property or assets, and much more. If you\u2019re running an online retailer but also investing in the stock market through your company, any proceeds from your investments would be considered non-operating revenue. <\/p>\n\n\n\n Your business\u2019s revenue is its lifeblood. <\/p>\n\n\n\n Yes, everyone wants huge profits: <\/p>\n\n\n\n But without a healthy stream of revenue, your business is dead in the water. <\/p>\n\n\n\n The stronger your revenue becomes, and the more you can increase your profit margins, the better off you\u2019ll be. <\/p>\n\n\n\n <\/p>\n\n\n\n There\u2019s no one-size-fits-all answer to the profit vs. revenue question. <\/p>\n\n\n\n Whether or not you choose to focus on maximizing profits or maximizing revenue is entirely dependent on what you hope to accomplish with your business in the long term. <\/p>\n\n\n\n If a business owner just wants to make a quick buck, they should focus on profits. <\/p>\n\n\n\n Remember, profit implies that the capital will not be reinvested into the business. Ultimately, profits are going to help the business owner\u2019s finances more than the business itself. <\/p>\n\n\n\n For lasting growth, business owners should focus instead on revenue. <\/p>\n\n\n\n Revenue indicates a business\u2019s incoming money on a wider scale. <\/p>\n\n\n\n Revenue can also be reinvested in growing your business further, which can help you make more profit down the road. <\/p>\n\n\n\n Thankfully, you don\u2019t need to pick between profit vs. revenue, sharing with your business the benefits of only one path. Instead, you can focus on different things as you grow, reinvesting revenue when necessary and taking profit when it makes sense. <\/p>\n\n\n\n Keep in mind that a business can have huge revenues that are negated by even larger expenses. Likewise, a business can have outstanding profits but fail to reinvest and grow — leading to stagnation and loss. <\/p>\n\n\n\n As a business owner, you can figure out whether to focus on profit or revenue by keeping a close eye on your business\u2019s finances, operational costs, and expected upcoming expenses. <\/p>\n\n\n\n There is no such thing as too much planning<\/a>. The more familiar you are with your business, the easier it will be to react to vicissitudes in the market or unforeseen issues in the future. <\/p>\n\n\n\n NEXT STEPS:<\/strong> Modern Business Solutions: Boost Efficiency, Maintain Flexibility<\/a> <\/p>\n\n\n\n Below, we\u2019ve put together a quick list of tips for business owners struggling with the profit vs revenue debate: <\/p>\n\n\n\n More revenue doesn\u2019t always mean more profits <\/p>\n\n\n\n On occasion, business owners become too focused on streamlined growth and the ease of scalability, obsessing over growing too much, too quickly<\/a>. <\/p>\n\n\n\n The idea of bringing in massive revenue and scaling to new heights before making an impressive exit<\/a> is intoxicating. Unfortunately, the streamlined nature of digital business ownership makes it easy for overeager entrepreneurs to overextend themselves. <\/p>\n\n\n\n Look at companies like WeWork. Despite its astronomical revenue, WeWork lost billions of dollars<\/a> in 2018 — leading to the destruction of investor confidence, aggressive management changes, and even a class action lawsuit<\/a> against the company. <\/p>\n\n\n\n Stories like this remind us that growing too quickly and ignoring your business\u2019s infrastructure can spell doom for even the strongest operations. <\/p>\n\n\n\n Pay attention to applicable indicators <\/p>\n\n\n\n Whether it\u2019s analyzing earnings reports<\/a>, studying marketing data to keep tabs on consumer sentiment, or simply using the market and Federal Reserve updates, modern business owners have several ways to stay informed on how the market is acting. <\/p>\n\n\n\n Collect all the data you possibly can that pertains to your business\u2019s operations. <\/p>\n\n\n\n Gather data on social media engagement to determine the most successful platforms and keep up with how your products are selling and which demographic is purchasing them. The more data you can gather, the easier it becomes to plan for the future. <\/p>\n\n\n\n Additionally, the more data you\u2019ve gathered, the easier it becomes to determine your business\u2019s growth stage<\/a>. <\/p>\n\n\n\n This standard gives business owners a straightforward model that they can use to help determine potential goals and areas of focus. <\/p>\n\n\n\n NEXT STEPS: <\/strong>Identify Your Business Growth Stage to Maximize Profits<\/a> <\/p>\n\n\n\n Planning is still required, but the growth stage model gives business owners short-term and long-term goals with applicable areas of interest for each stage. <\/p>\n\n\n\n Strong profitability is more effective than straightforward revenue growth, and this is often as simple as causing each product or service sold to bring in more income. This is because profitability is simply a measure of your business\u2019s profits against its expenses. <\/p>\n\n\n\n Instead of trying to expand your business without worrying about operational costs, focusing on profitability helps you to make the most of the revenue you\u2019re already bringing in. In other words, focusing on profitability allows you to reduce operational costs and improve your business\u2019s infrastructure. <\/p>\n\n\n\n Let\u2019s look at this 2-quarter Best Business example below to clear things up: <\/p>\n\n\n Best Business has had a tough quarter. <\/p>\n\n\n\n It\u2019s still bringing in $250,000 in sales, but operating expenses have risen to an astonishing $300,000 – meaning the company is losing $50,000 that quarter. <\/p>\n\n\n\n If Best Business were to double its sales and its operating expenses, it\u2019d still be losing money. <\/p>\n\n\n\n So, instead of focusing on revenue, Best Business needs to focus on profitability. <\/p>\n\n\n\n The following quarter, Best Business buckled down. <\/p>\n\n\n\n It brought in another $250,000 in sales, but after transitioning to a Virtual Office<\/a>, consolidating part-time positions, automating receptionist work, and strengthening its relationships with its suppliers, Best Business only spent $100,000 on operating expenses. <\/p>\n\n\n\n Now: <\/p>\n\n\n\n Best Business\u2019s revenue hasn\u2019t increased at all, but the company made $150,000 more than it did the previous quarter. Thanks to these infrastructure and personnel changes, Best Business can continue keeping more of the future revenue it brings in. <\/p>\n\n\n\n Plan, plan, plan <\/p>\n\n\n\n Barring an obsessive nature that prevents you from getting virtually anything else done, there is no such thing as too much planning. <\/p>\n\n\n\n The better prepared you are for the future, the better positioned your business will be. <\/p>\n\n\n\n <\/p>\n\n\n\n Revenue and profit are both important elements of your business\u2019s finances. <\/p>\n\n\n\n You should aim to reinvest a sizable amount of your revenue into growing your business further. This will keep your business stable while ultimately helping you make more profit in the long term. <\/p>\n\n\n\n That said, your business doesn\u2019t always need to focus on one thing \u2013 whether that\u2019s increasing revenue or increasing profits. <\/p>\n\n\n\n By focusing on profitability, cutting operational costs, and improving your business\u2019s infrastructure, you can get the most out of the money you\u2019re already making. <\/p>\n\n\n\n Further reading<\/strong>: <\/p>\n\n\n\n Alliance Virtual Offices<\/a> provides several solutions for established entrepreneurs, fledgling business owners, and everyone in between. <\/p>\n\n\n\n The profit vs. revenue dilemma can lead to frustration and confusion about how you should be approaching your business\u2019s finances. <\/p>\n\n\n\n Thankfully, Alliance\u2019s digital solutions can help your business reduce operational and your full-time hiring requirements by a considerable margin while boosting your team\u2019s privacy. <\/p>\n\n\n\n Our Virtual Offices<\/a> are the perfect alternative to traditional office space. <\/p>\n\n\n\n Historically, business owners were forced to enter 3 to 5-year leases for commercial space — including first and last months\u2019 rent, utilities, and other leasing fees. With one of Alliance\u2019s Virtual Offices<\/a>, business owners can get an easy-to-manage 6-month plan for a fraction of the cost. <\/p>\n\n\n\n In addition to being cost-efficient and flexible, our Virtual Offices<\/a> come with access to a physical workspace. This means that if you just want to avoid the monotony of your day-to-day routine, you have an easily reservable workspace that\u2019s ready for you! <\/p>\n\n\n\n With our Live Receptionist<\/a>, you don\u2019t have to worry about multi-tasking every time the phone rings. You also don\u2019t have to worry about hiring a full-time receptionist. <\/p>\n\n\n\n Instead, use one of our friendly and professional receptionists to strengthen customer relations and give yourself some time away from the phone. <\/p>\n\n\n\n Virtual Phone Numbers<\/a> represent another great tool that allows business owners to effortlessly connect with team members, keep personal information private, and provide unlimited connections while you quickly scale to accommodate new team members. <\/p>\n\n\n\n As you can see, the profit vs. revenue question isn’t as simple as it seems, and your solution depends largely on your unique business goals. <\/p>\n\n\n\n For more information on tools that will improve your net profit and gross income, check out Alliance\u2019s Virtual Office Blog<\/a> or contact us today<\/a>! <\/p>\n\n\n","protected":false},"excerpt":{"rendered":" Deciding on profit vs revenue depends largely on what you hope to accomplish for your business. Focusing on revenue is better for growing your business 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Deciding on profit vs revenue depends largely on what you hope to accomplish for your business. Focusing on revenue is better for growing your business long-term.<\/p>\n","category_list_v2":"Small Business<\/a>","author_info_v2":{"name":"John Donovan","url":"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/author\/john-donovan\/"},"comments_num_v2":"0 comments","author_meta":{"display_name":"John Donovan","author_link":"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/author\/john-donovan\/"},"featured_img":"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2023\/04\/00-featured-profit-vs-revenue-what-is-the-difference-300x73.png","coauthors":[],"tax_additional":{"categories":{"linked":["Small Business<\/a>"],"unlinked":["Small Business<\/span>"]}},"comment_count":"0","relative_dates":{"created":"Posted 3 years ago","modified":"Updated 3 months ago"},"absolute_dates":{"created":"Posted on April 3, 2023","modified":"Updated on April 14, 2026"},"absolute_dates_time":{"created":"Posted on April 3, 2023 8:25 am","modified":"Updated on April 14, 2026 10:37 am"},"featured_img_caption":"","series_order":"","_links":{"self":[{"href":"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-json\/wp\/v2\/posts\/27018","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-json\/wp\/v2\/users\/46"}],"replies":[{"embeddable":true,"href":"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-json\/wp\/v2\/comments?post=27018"}],"version-history":[{"count":1,"href":"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-json\/wp\/v2\/posts\/27018\/revisions"}],"predecessor-version":[{"id":53253,"href":"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-json\/wp\/v2\/posts\/27018\/revisions\/53253"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-json\/wp\/v2\/media\/31180"}],"wp:attachment":[{"href":"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-json\/wp\/v2\/media?parent=27018"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-json\/wp\/v2\/categories?post=27018"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-json\/wp\/v2\/tags?post=27018"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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\n\n\n![\"\"](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2023\/01\/01-section-what-is-profit.png\")
<\/a><\/figure>\n<\/div>\n\n\nWhat is profit? <\/h2>\n\n\n\n
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Gross profit <\/h3>\n\n\n\n
Net profit <\/h3>\n\n\n\n
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\n\n\n\nOperating profit <\/h3>\n\n\n\n
Profit before\/after tax <\/h3>\n\n\n\n
\n\n\n![\"\"](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2023\/01\/02-section-what-is-revenue-1.png\")
<\/a><\/figure>\n<\/div>\n\n\nWhat is revenue?\u00a0<\/h2>\n\n\n\n
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Operating revenue <\/h3>\n\n\n\n
Non-operating revenue <\/h3>\n\n\n\n
\n\n\n![\"\"](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2023\/01\/03-section-profit-vs-revenue-which-is-more-important-1.png\")
<\/a><\/figure>\n<\/div>\n\n\nWhich is more important to business owners? <\/h2>\n\n\n\n
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\n\n\n\nProfitability over revenue growth <\/h3>\n\n\n\n
![\"\"](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2023\/01\/05-infographic-profit-vs-revenue-what-is-the-difference-1.png\")
<\/a><\/figure>\n<\/div>\n\n\n
\n\n\n![\"\"](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2023\/01\/04-section-modern-digital-solutions-to-the-profit-vs-revenue-debate-1.png\")
<\/a><\/figure>\n<\/div>\n\n\nModern digital solutions to the profit vs. revenue debate <\/h2>\n\n\n\n
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