Module 1 · Foundation

Know Your Numbers (Without the Jargon)

“Revenue is not profit, and profit is not cash.”

60 minDeliverable: Profit Snapshot

What you'll walk away with

Understand the three numbers that actually matter — revenue, profit and cash
Translate the handful of accounting terms you need into plain language
Build a Profit Snapshot from your last three months of real numbers

Worked example

Maya's Profit Snapshot

Maya takes the last three months: $9,200, $7,600 and $8,400 of work delivered, minus $600 of refunds. That averages $8,200 a month of real revenue. Then she lists every expense the business carried over those same three months, as a monthly average — including the salary she pays herself.

Contract illustrator (cost of delivery): $1,200
Virtual assistant (fixed overhead): $600
Software, fonts and stock (fixed overhead): $340
Website and email (fixed overhead): $110
Ads (variable overhead): $450
Maya's own salary (fixed overhead): $3,000

Average monthly revenue: $8,200
Total monthly costs: $5,700
True monthly profit: $2,500
Gross margin: 85%
Net margin: 30%
Hours she works: 45/week (195/month)
Profit per hour: $13

Maya used to leave her $3,000 salary out of the sum and call the result $5,500 of profit. Her pay is a cost like any other, so the business really makes $2,500 — and only $13 an hour of it comes back for every hour she works. Owner pay has to be affordable out of profit; if it is not, the business is funding her from cash, not earnings.

Plain-English definitions

The words you actually need

These words appear in every module. Read them once here in plain English, with Maya's numbers beside them, and nothing later in the program will feel like jargon.

Revenue

What you earned for work you actually did in a period — whether the client has paid yet or not. It is a sales number, not a your-money number: a large part of it is already promised to other people.

Work delivered in the period − refunds and credits = revenue

In Maya's business: Maya earned $9,200, $7,600 and $8,400 of work over three months, and refunded $600. Whether every invoice was settled inside that month or not, her revenue averages $8,200 a month.

Cash in

Money that has actually landed in your bank account in the period. Different from revenue when clients pay late, pay in instalments, or when a platform holds funds for a week.

Deposits that cleared your account in the period = cash in

In Maya's business: Maya finished a $1,200 brand package in March and was paid in April. March revenue counts it, because the work was done in March; March cash in does not, because nothing landed. That is why her account felt empty in a 'good' month.

Cost of delivery

What it costs you to give one customer the thing they bought — including your own time. If you sell nothing this month, you do not pay it. You will also see it called a direct cost — it is the same thing, and we use both names in this program.

In Maya's business: Maya's contract illustrator, $1,200 a month, only gets paid when there is a brand package to illustrate. That is cost of delivery.

Overhead

Everything the business costs to exist, separate from delivering any one sale. Overheads come in two flavours — fixed and variable — and both are defined next. Your own pay sits here too.

Fixed overhead + variable overhead = total overhead

In Maya's business: Maya's assistant, software, website, ads and her own $3,000 salary are all overhead: $4,050 a month before she delivers a single project.

Fixed cost

A type of overhead you pay whether you sell nothing or everything this month. It does not care how busy you are, which is why it is dangerous in a quiet month. Typical examples in a business like yours: subscriptions and software, a retainer bookkeeper or VA, rent or coworking, insurance, course-platform or hosting fees, and your own salary.

In Maya's business: Maya's virtual assistant ($600), software and fonts ($340), website and email ($110) and her own salary ($3,000) all cost the same in a month with five clients and in a month with none. That is $4,050 of fixed overhead.

Variable cost

A type of overhead that moves up and down with your sales or your activity. Turn the activity off and the cost drops with it. Typical examples: ad spend, payment-processing fees, affiliate commission, per-seat or usage-based tools, and shipping or printing.

In Maya's business: Maya's ads are $450 a month at her current spend. If she halves the ad budget the cost halves — nobody sends her an invoice for the difference. That makes it variable, not fixed.

Gross margin

The percentage of revenue left after delivery costs only — before any overhead. It answers one question: does this offer work? Below 50% for a service or digital business, the offer itself needs fixing.

(Revenue − cost of delivery) ÷ revenue × 100 = gross margin %

In Maya's business: Maya's revenue is $8,200 and her only delivery cost is the $1,200 illustrator. $8,200 − $1,200 = $7,000 gross profit. $7,000 ÷ $8,200 = 0.854, so 85% gross margin. Healthy — meaning her problem is not the offer, it is the overhead underneath.

Net profit

What is left after everything — delivery, fixed and variable overhead, and your own pay. Your salary is a cost of the business, not a share of the profit, so it comes out before this number. Net profit answers a different question: does the business work?

Revenue − all costs (including your pay) = net profit

In Maya's business: $8,200 revenue − $5,700 of total costs (including her $3,000 salary) = $2,500 net profit a month, a 30% net margin — not the 67% she got when she left her own pay out of the sum.

Three numbers, three different questions

Revenue answers 'is anyone buying?'. Profit answers 'is this worth doing?'. Cash answers 'can I pay what is due on Friday?'. Founders get into trouble by using the first number to answer all three questions.

A business can have its best revenue month ever and lose money that month. A business can be genuinely profitable and still miss payroll because a client paid late. These are not contradictions — they are three different measurements taken at three different points.

Why the confusion is structural

Revenue is the loudest number in your business. It shows up in your payment notifications, in your launch spreadsheet, in every conversation with another founder. Profit shows up nowhere unless you deliberately calculate it, and cash only announces itself when it runs out.

So the fix is not discipline. The fix is building one calculation, once, and then repeating it monthly.

Counting your own time as a cost

This is the step most founders skip and the one that changes the picture most. If you are not paid, the business is not profitable — it is subsidised. Put a value on your hour now, even a rough one: what would you pay someone competent to do your work? That number goes into your snapshot.

How to build the snapshot

Use the last three complete months and average them — one month is noise
Take revenue as money actually received, then subtract refunds and chargebacks
List every cost that left the account and tag it: delivery, fixed, or variable
Estimate rather than skip. A rough number you can improve beats a blank
Do not tidy the numbers to make them look better. The point is the truth, and the truth is private

What good looks like

For most digital and service businesses, a gross margin below 50% means the offer itself needs work, and a net margin below 10% means the business is running on goodwill. There is no shame in a number below those lines — that is exactly what the next six modules are for.

Your deliverable

Profit Snapshot

Revenue in, real costs out, true profit calculated for you

Use the last three complete months. Revenue means the work you did in each month — invoiced or not, paid or not. Then enter what each cost actually was in each of those three months. If something was only paid once — a contractor on one project, an annual fee — put it in the month it happened and leave the other months at 0. Nothing here is an average; the maths does that for you.

Revenue — actual, month by month

Month 1 revenue earned (work done)($)

Month 2 revenue earned (work done)($)

Month 3 revenue earned (work done)($)

Refunds, chargebacks & discounts over the 3 months($)

Money that came in and went straight back out.

Your own pay — actual, month by month

Month 1 — what you actually paid yourself($)

Your pay is a cost of the business. If you took nothing in a month, enter 0 — that itself is a finding.

Month 2 — what you actually paid yourself($)

Month 3 — what you actually paid yourself($)

Hours you personally work in the business per week

Cost lines — what each one actually cost in each month

Cost

Type

Month 1 amount($)

Month 2 amount($)

Month 3 amount($)

Cost

Type

Month 1 amount($)

Month 2 amount($)

Month 3 amount($)

Cost

Type

Month 1 amount($)

Month 2 amount($)

Month 3 amount($)

Cost

Type

Month 1 amount($)

Month 2 amount($)

Month 3 amount($)

Calculated for you

Revenue over the 3 months (net of refunds): $0
Average monthly revenue: $0
Cost of delivery (monthly average): $0
Fixed overhead (monthly average): $0
Variable / marketing (monthly average): $0
Your own pay (an overhead): $0
Total monthly costs: $0
Gross margin: —
True monthly profit (after paying yourself): $0
Net profit margin: —
Profit per hour you work: —
Is your pay sustainable?: You are paying yourself nothing

Preview mode — this template works exactly as it does in the course, but nothing is saved.

Module 0 Module 2

Want to see the rest?

Modules 5–7 cover the pricing leak, the delivery leak, and the 90-day profitability roadmap that turns all of this into a monthly habit.

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