Post by Okechukwu Eke Ohakah (@OhakahEke)

BUSINESS CLASSROOM: DON’T CONFUSE SALES WITH PROFIT

One of the biggest mistakes I see small business owners make is confusing sales with profit.

You can make ₦1 million in sales and still lose money.

For example, imagine you sell products worth ₦1 million, but by the time you remove the cost of buying the goods, transportation, salaries, rent, logistics, electricity, packaging, taxes and other business expenses, you have spent ₦1.05 million.

You made ₦1 million in sales, but you actually lost ₦50,000.

Revenue is what comes into the business. Profit is what remains after the business has paid its costs.

This is why a busy business is not necessarily a profitable business. High sales can look impressive from the outside while the owner is quietly running at a loss.

Know your numbers. Know what each product costs you. Know your overheads. Know your margins.

If you don't know your costs, you don't really know how well your business is doing.

Don't just ask, “How much did I sell?”

Also ask, “How much did I actually make?”

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