Your Revenue Isn’t Your Profit
Issue #2 | Your Revenue Isn't Your Profit
Jul 31, 2026
Quick Quiz: Can You Calculate Your Profit in 60 Seconds?
“If your business brought in $150,000 last year, and you spent $80,000 running it, your profit is $70,000. True or false?”
[readers scroll past content to find answer]
How to Know If You’re Actually Profitable
Here’s what I hear all the time: “Our revenue is up 40% this year!”
Great. But then I ask: “What’s your profit?”
Long pause. Confused look. “Uh... I think it’s up too?”
Wrong. Revenue is not profit. Revenue is what comes in. Profit is what’s left after everything goes out. And I’d say 7 out of 10 business owners have no idea if they’re actually making money or just... moving money around.
Let me fix that for you.
Revenue ≠ Profit ≠ Cash Flow (They’re Three Different Things)
Revenue is the total money that came in. That $150K deposit from clients? That’s revenue. Feels amazing, but it’s not profit.
Profit is revenue minus all your expenses. Software subscriptions, payroll, rent, insurance, taxes you set aside—everything. That’s your real number. That’s what you actually made.
Cash Flow is whether you have cash in the bank right now to pay your bills. You can be profitable on paper but broke in the bank account (usually because you’re waiting on client payments). That’s a different problem, but it’ll sink you just as fast.
Most business owners obsess over revenue, ignore profit, and then panic about cash flow.
Here’s How to Calculate Your Actual Profit (It’s Simpler Than You Think)
Step 1: Add up every dollar that came in last month. (Revenue)
Step 2: Add up every dollar you spent. (Expenses)
Step 3: Subtract Step 2 from Step 1. (Profit)
That’s it.
The mistake most people make? They forget expenses. They remember payroll and rent. But they forget the software subscriptions, the contractor they paid, the office supplies, the business meals, the conference attendance. Those add up fast.
This is exactly why mixing personal and business money (remember Mistake #2 from last month?) destroys your ability to see real profit. If your personal groceries are buried in business expenses, your profit number is completely fake.
A Real Example
Let’s say you run a service business:
Revenue: $25,000 (you invoiced clients)
Payroll: $12,000 (you and your team)
Software: $1,200 (QuickBooks, Slack, whatever)
Rent: $2,000
Taxes set aside: $2,500 (quarterly estimated taxes)
Insurance: $500
Contractor: $3,000
Misc (supplies, meals, travel): $1,500
Total Expenses: $22,700
Your Profit: $25,000 - $22,700 = $2,300
That feels different than “I made $25K,” doesn’t it? And if you didn’t do the math, you might’ve spent that $2,300 thinking you had more profit than you actually did. Then tax season hits and you’re short.
Why This Matters (Beyond Feeling Good)
Knowing your actual profit tells you:
Can I afford to hire someone? (Is there profit left after that new salary?)
Should I raise my prices? (Is your margin healthy, or are you overworked for peanuts?)
Can I take a bigger owner’s draw? (Only if profit supports it)
Am I actually growing? (Is profit going up, or just revenue?)
Without real profit numbers, you’re making business decisions in the dark.
Your Action Item
Pull last month’s bank statements and expense reports. Add up revenue. Add up expenses. Do the math.
What’s your real profit number?
If you don’t know, that’s okay—that’s exactly what I help clients figure out. But start paying attention. You can’t fix what you don’t measure.
Next issue: “The One Report Your Accountant Should Send You Every Month” (and the red flags if they’re not)
Kristen Leicht
Founder, K&L Business Solutions
Making accounting sexy since 2016
Ready to know your real profit number? Let’s talk. Schedule a 15-min call or hit reply with questions.
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P.S. — If you do that profit calculation and the number surprises you (in a bad way), forward this to someone you trust. Sometimes you need a second set of eyes.
Quiz Answer:
False. Here’s why: Revenue ($150K) minus expenses ($80K) does equal $70K if you’ve actually captured all your expenses. But most business owners miss things. That $1,200 software subscription you forgot to include? That $3K contractor payment? The quarterly taxes you didn’t set aside? Those eat into profit fast.
Also, that formula assumes you already paid taxes. If you haven’t accounted for federal income tax AND self-employment tax, your actual profit is even smaller. For a sole proprietor or S-corp, you’re looking at roughly 25-30% of that going to taxes. So your $70K profit is really closer to $49K after taxes.
That’s why calculating profit matters—the real number is usually way lower than business owners think.
