Why You Should Be Wary of the Term ‘Revenue’

As you get older, people might try to get you to invest in things, buy certain products, etc.

Oftentimes, they attempt to prove their legitimacy is by sharing their past year’s revenue. I see this a lot with online courses, actually. People try to tell you they’re a good teacher because they had X million in revenue last year, and they can teach you how to do it, too!

But here’s the problem with that: a person’s revenue is irrelevant unless their PROFIT is also high.

People tend to throw around the words “revenue” and “profit” as though they’re interchangeable, but they most certainly are not. And knowing the difference is crucial in determining how successful or legitimate a company is.

So, what is revenue?

Basically, revenue is how much a person/company made over a certain period of time

And what is profit?

Profit is how much a person/company made over a certain period of time, MINUS their expenses over the same period.

Why is the difference so important?

As we all know, it’s a lot easier to spend money than to make it. The same is true for businesses. It’s entirely possible to have astronomical revenue and barely any profit, or a high revenue and have LOST money in the same time period.

Take advertising fees, for instance, which I have some experience with from Ahead of Her Time. Though I may run some again in the future, I ultimately decided not to make them a staple because I only make a few dollars from the sale of each book, and it cost me a few dollars in advertising fees to make a sale. And considering I pay taxes on the money I earn…well, I was making money (revenue) from book sales, but my profits were low (if anything).

The only reason I might do them again is because they drive traffic to Vocabbett, which is another income stream, but alone, they were a source of revenue, but not a source of profit.

Capeesh? (Which is Americanized slang from the Italian “capisce,” which means understand, though everyone in Italy now says “capito,” which means understood).

Moral of the Story

Be wary of anyone who only shares their revenue, and never their profits!