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Profit First: What Does "Real Revenue" Mean?

July 30, 2018

What Does Real Revenue Mean?

Real Revenue is a term used in Profit First to show a business owner the "real" money their business makes. The top line revenue is not truly representative of the revenue size of your business. Your business may make a margin on materials and subcontractor costs, but that margin is not the core driver of profitability in your business.

This can be a real wake-up moment. For example, a home builder may have $10M in annual revenue and Materials and Subcontractors per year. This means the company has $3M in Real Revenue and manages another $7M in materials and subcontractors costs. This business needs to operate like a $3M company, not a $10M company.

Real Revenue is NOT the same as gross profit. Real Revenue is total revenue minus the cost of materials and subcontractors utilized to create and deliver the service or product. Gross profit can take into account burdened labor, building costs, and other "cost of sales" expenses.

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Profit First Strategies helps business owners experience profit.

Profit First Strategies

Profit First is a system that helps you produce profits in your business the first month and always. Using this approach to running a small business you can make profit a habit and not a remote possibility. The Profit First approach starts by rewriting the usual bookkeeping formula so that profit is taken and put in the bank with every bookkeeping cycle. The system follows through by instilling discipline in your budgeting and cash flow management. Read our articles to learn the basics of Profit First and Profit First Strategies that you can use this approach to make you business more successful and your business life more efficient and easier.
Profit First helps you experience profit.

Ronald B. Allen
CEO, Profit First Professional, Fix This Next Founding Advisor
Principle of an accounting firm that’s committed to educating business owners on their financial health, providing a trans-formative strategy and helping them experience their profit!