Why Your Sales Are Growing but Your Profits Aren't
More sales do not always mean a healthier business Introduction: Imagine running a retail business that recorded ₦5 million in monthly sales last quarter. This quarter, sales increased to ₦6 million. On the surface, that looks like progress. But at the end of the month, your bank balance tells a different story. Suppliers need payment, advertising costs have increased, and the money left over is smaller than expected. What happened? The problem may not be a lack of sales. It may be that the business is generating revenue without understanding the costs and margins behind it. Revenue tells you how much you sold. Profit analysis helps you understand how much you kept. For business owners, the difference is critical. Without examining the right metrics, increasing sales can sometimes mean increasing costs faster than revenue. 1. Start by separating revenue from profit Revenue is the income generated from selling products or services before expenses are deducted. Profit is what...