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Understanding the difference between revenue and profit is essential for anyone starting a business or managing finances. Many people confuse these two terms, but they play very different roles in determining a company’s financial health. This beginner-friendly guide breaks down everything you need to know about revenue vs profit, using real-world examples and simplified explanations tailored for Indian businesses.
What is Revenue?
Revenue, also called sales or turnover, is the total income generated by a business from its core operations, without deducting any costs.
Examples:
- If you run a shop and sell ₹5,00,000 worth of goods in a month, your revenue is ₹5,00,000.
- For an online coaching platform like BossWallah, the total money earned from course sales is revenue.
Types of Revenue:
- Operating Revenue: From the main business (e.g., product sales).
- Non-Operating Revenue: From secondary sources (e.g., rent income, interest).
What is Profit?
Profit is the net income left after all expenses (like rent, salaries, marketing, taxes) are subtracted from revenue. It reflects how efficiently a business is running.
Formula:
Profit = Revenue – Expenses
Types of Profit:
- Gross Profit = Revenue – Cost of Goods Sold (COGS)
- Operating Profit = Gross Profit – Operating Expenses
- Net Profit = Operating Profit – Taxes & Interest
Example:
Let’s say a bakery earns ₹2,00,000 in revenue in April.
- Raw materials: ₹80,000
- Rent & salaries: ₹50,000
- Advertising: ₹10,000
- Taxes: ₹5,000
Net Profit = ₹2,00,000 – (₹80,000 + ₹50,000 + ₹10,000 + ₹5,000) = ₹55,000
Revenue vs Profit: The Key Differences
| Basis | Revenue | Profit |
| Definition | Total earnings from sales | Earnings after all expenses |
| Focus | Business performance | Business health/sustainability |
| Expenses Included? | No | Yes |
| Used in | Sales strategy, growth analysis | Financial viability, tax filings |
| Example | ₹10 lakh from product sales | ₹2 lakh after expenses |
Real-Life Indian Business Examples
Small Retail Store:
- Revenue: ₹15,00,000/month
- Expenses: ₹13,00,000
- Profit: ₹2,00,000 (Low profit margin)
Online Coaching:
- Revenue: ₹25,00,000/month from course sales
- Expenses: ₹10,00,000
- Profit: ₹15,00,000 (High scalability = higher profits)
ALSO READ – Top 10 Pricing Strategy in Marketing Tips for Indian Businesses (2025)
Why Understanding Revenue vs Profit is Important
Helps in:
- Evaluating business performance accurately.
- Pricing products/services for optimal margin.
- Attracting investors or loans, who look at profitability.
- Calculating the break-even point for new ventures.
- Making informed budgeting and forecasting decisions.
Common Mistakes to Avoid
- Focusing only on revenue growth and ignoring expenses.
- Underestimating hidden costs like taxes, shipping, and maintenance.
- Assuming high sales = high profits (not always true).
ALSO READ – What Is Marginal Revenue? Definition, Importance & Use in Pricing
Key Takeaways
- Revenue is the total money earned from business activities (sales).
- Profit is what remains after subtracting all business expenses from revenue.
- A business can have high revenue but low profit, or even a loss, if expenses are high.
- Understanding both is crucial for pricing, budgeting, and investment decisions.
Clear knowledge of revenue vs profit helps assess business sustainability.
Learn more about Business skills here to unlock new growth opportunities
Need Expert Guidance?
Starting a business can be challenging, but you don’t have to do it alone! At Boss Wallah, our 2,000+ business experts are ready to provide valuable insights and guidance. Whether you need help with marketing, finance, sourcing, or any other area of your business, our business experts are here to help you succeed
Confused about Which Business to Start?
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Conclusion
Understanding the difference between revenue and profit is the first step in mastering business finance. Revenue shows how much money your business is making, while profit reveals how much you’re keeping. For long-term success, businesses must track both closely.
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Frequently Asked Questions (FAQs)
Revenue is the total money earned by selling goods or services.
Not exactly. Revenue is total earnings; income (or profit) is what’s left after expenses.
Yes, if expenses are equal to or more than revenue, there’s no profit.
Gross profit = Revenue – Direct costs; Net profit = Final profit after all expenses and taxes.
Profit shows if the business is financially healthy and sustainable.
It means the business has a loss and is spending more than it earns.
Either increase revenue (more sales) or reduce expenses.
Revenue is shown at the top; profit comes after deducting costs.
Yes, net profit is taxable under income tax laws.
Most focus on growing revenue first, then optimising to become profitable.
