The main reason for having a business is to make money. In business terms, the money you make is the net profit you achieve at the end.
Net Profit = Total Sales – Total Expenses
This is a very basic but highly important equation for every business operation. To start making profit, your total sales (revenue) needs to be higher than your total expenses.
This means that you need to achieve the following 2 key points:
- Increase your Total Sales and keep them higher than your Total Expenses
- Control and Decrease your Total Expenses and keep them lower than your Total Sales
In order to manage to control your Total Expenses, you need to know the basics about them.