Profit = Income - Cost of Sale - Operating Expenses

Profit = Income - Cost of Sale - Operating Expenses

All the revenue that comes into your business from sales of either goods or services or intellectual property.

Cost of Sale
These are expenses that only happen because of a sale. An example would be paying a salesperson you employ or contract a commission for selling a product or service. If the salesperson doesn't make a sale, you don't owe them the commission.

Note: Cost of Sale can also be Cost of Goods Sold if you deal more with product than services. Think dough, sauce, spices, toppings if you are a pizza restaurant.

Operating Expenses
Operating expenses happen regardless of whether or not you make any sales in your business. Most employees would be an operating expense as would rent, utilities, etc.

In our last newsletter we talked about Profit Margin for Your Business and I urged folks to think about what their profit should be before they start. So, in an overly simplistic way to look at this, you simply add;

Desired Profit + Operating Expenses + Cost of Sales = Revenue Required

Noodle this out to get closer to the activities it will take for you to live your best life and have a business you are proud to own.

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