A Starters Guide: Simplifying Revenue, Profit, and Cash Flow for Entrepreneurs
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Hello New Entrepreneurs and Leaders!
You are here today because you have the burning desire to push yourself to GREATness. You're building something from nothing, and that’s the hardest part! To take your business fundamentals to the next level, you need to speak the language of money. For many years, I myself was unfamiliar with this language, and I remember exactly where you are coming from. I was in your shoes when I started building my first businesses. Today, however, I’m going to break down the three most important numbers in business like we're just talking over a cup of cappuccinos at 787 coffee.
This isn't about textbooks; it’s about what really keeps the lights on and the business growing. So, let’s do this.
1. Revenue: The Flow of a Business
Revenue is all the money you get from selling your product or service. That's it!
The Children's Game Explanation: Imagine you’re playing Hungry, Hungry, Hippos and every white marble you "eat" is a sale. All the marbles you've collected in your hippo's tray—all of them, before you give any back to pay for the game—that's your revenue.
The Entrepreneurial Take: At 787 Coffee, if we sell 100 cookies at $5 each, our revenue is $500. This number shows how much business you're doing, but it doesn't tell you if you're actually making money. It's the starting line, not the finish line.
Why Is Revenue The Flow of a Business
Revenue is like the blood flow running through the veins of any business. It's more than just a number; it's a direct measure of growth. Without sales, there is no business—you have a hobby. Growing your revenue is crucial because it proves that you have a solution to your customer base problem, and whatever business model you are in it is building momentum.
It's Your Engine: Revenue provides the cash you need to cover your fixed costs like rent and salaries. It's the fuel that keeps your business running every single day.
It Gives You Options: A strong revenue stream gives you the power to reinvest. You can use that money to buy better equipment, hire more humans, or launch a new product line.
It's a Measure of Momentum: For ambitious entrepreneurs, a growing revenue number shows investors and partners that you have momentum. It’s proof that your business is scalable and ready to take on the next big challenge.
2. Profit: The Real Scorecard
Profit is the money you get to keep. It's what's left after you pay for everything you need
The Children's Game Explanation: Let's go back to Hungry, Hungry, Hippos. where every marble is a coin. To keep playing, you need to "pay" to “play” for the game by putting 8 marbles back in the middle. In the first round, you collected a total of 20 marbles (your revenue). When you subtract the 8 marbles you had to pay, the 12 marbles you have left are your profit. That's how many coins you get to keep and use to play another game!
The Entrepreneurial Take: For those 100 cookies sold, we had to pay for different vendors, packaging, and the oven's electricity. Let’s say all those costs totaled $200. Our profit is $500 (revenue) minus $200 (expenses), which gives us a total profit of $300. This number is the most crucial measure of your business's health.
Why Is Profit the Real Scorecard?
For any ambitious entrepreneur, profit is the ultimate indicator of success. While revenue shows your demand, profit shows a sustainable business.
It Proves Your Business Works: Profit proves that your business model is sustainable. It shows that you're not just selling a product but also making more money than it costs to produce it.
It’s Your Reward: Profit is your paycheck. It's the money that you can reinvest to scale your business, hire more Humans, or use to live the life you've been working so hard for.
It's a Magnet for Investors: A healthy profit margin tells potential investors that your business is a good investment. It signals that you are an effective manager of your resources and that your business has a clear path to long-term success.
3. Cash Flow: The Life Source of Your Business
This is where you really need to spend time, energy, and focus as an Entrepreneur. This is an area where many entrepreneurs miss the mark, even if they're making a profit. Cash flow is the real-time movement of money coming in and out of your bank account. It’s the most important number because it tells you if you have enough money to pay your bills, overhead, inventory, expenses, team, and yourself.
The Children's Game Explanation: So in this round of Hungry, Hungry, Hippos. You have 12 marbles of profit from the last game, but let’s say those marbles are still at your opponent's side of the table, waiting to be collected. You want to play a new game, and it costs 8 marbles to join. You can't play because the marbles you've earned aren't in your hand yet. That's a cash flow problem. Your profit is waiting, but you don't have the marbles you need right now.
The Entrepreneurial Take: Imagine you own a bakery and a customer buys a hundred cookies from you, but they promise to pay you next month. On paper, you made a great sale and are profitable. But if you have to buy more flour and sugar today to make more cookies, and you don't have the cash in your pocket, you can't run your business. That’s the importance of cash flow.
Why Is Cash Flow the Life Source of Your Business?
For an ambitious entrepreneur, cash flow isn't just a number—it's your oxygen.
It Keeps You Alive: A business can be profitable on paper but still can have the risk to go bankrupt if it runs out of money to pay its team members, suppliers, and rent. It’s a make or break for any business
It Fuels Your Growth: Positive cash flow allows you to seize opportunities. You have more opportunities in economic recessions, invest in a new machine, or expand your operations without having to take on debt.
It Gives You Peace of Mind: Knowing you have cash on hand gives you the security and flexibility to make smart long term decisions, without the stress of worrying about paying next week's bills.
Your hustle starts now.
Thank you for taking the time reading this awesome human. The secret language of money isn't so secret after all. Revenue is your flow, Profit is your scorecard, and Cash Flow is your life source. You started this journey to build something real, to leave a legacy. Mastering these numbers isn't just about spreadsheets; it's about giving your dream the legs they need for it to stand on. Your dreams are not meant to just survive, but to thrive. Keep pushing, keep learning, and never stop building.
Want more real-world lessons and straight talk on how to build a business? Join my community and get these insights directly.
Let's get to work. 💯
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3 Easy Steps to Apply This to Your Business or Life TODAY
These three concepts—Revenue, Profit, and Cash Flow—are the fundamentals for every entrepreneur. It's crucial for the longevity of any business you start that you know these terms as well as you remember your mother's name.
So, what do you do with this information?
Track Everything: Get a simple spreadsheet or an app and write it all down. Every single dollar of revenue and every dollar of expenses.
Understand Your Costs: Break down what it really costs you to make your product or deliver your service. This is your path to higher profit margins.
Prioritize Cash Flow: Always know how much money is in your bank account. Don't spend money you don't have. Negotiate payment terms that work for you—get paid as quickly as possible, and pay your bills on time.
Mastering these three numbers is the difference between a hustle and a thriving business. It’s the difference between hoping to make it and knowing you're building a legacy.
Want more real-world lessons and straight talk on how to build a business? Join my community and get these insights directly.Real talk: Most people read about business opportunities and do nothing. But you're different. You understand that energy is currency, and the world needs solutions that come from the heart. Pick one of these five business types, follow these three steps, and in 30 days you'll have real data about whether your idea has legs. Stop dreaming about entrepreneurship and start building it, one small action at a time.
Let’s simplify the concepts:
Starting a business is like deciding what fruit to sell at school - first, figure out what you're naturally good at and what you love (Step 1: maybe you're great at organizing things and you love healthy snacks, so think about selling fruit). Then, spend a week asking your classmates what snacks they wish they could buy at school and what they hate about the current cafeteria options (Step 2: this is like checking if people actually want apples or if they're tired of the same old stuff). Finally, test your idea small by buying 10 apples for $5, selling them for $1 each at lunch, and seeing if you can make your first $10 profit (Step 3: if kids buy your apples and ask for more tomorrow, you know you have a real business idea). Most people just dream about selling fruit but never actually bring apples to school - but you're different because you understand that taking one small action (like bringing those 10 apples) teaches you more than months of planning what the perfect fruit stand would look like. Stop thinking about becoming the "apple business kid" and just bring the apples!