Revenue is every dollar that comes into your business; profit is what remains after you subtract all costs. A business earning $200,000 in revenue but spending $210,000 is losing money — the number on your bank statements is not your profit. Calculate your gross profit margin (revenue minus cost of goods sold, divided by revenue) and net profit margin (after all expenses) monthly, not annually.

Fixed costs stay the same regardless of sales volume — rent, insurance, software subscriptions, and loan payments. Variable costs fluctuate with sales volume — materials, shipping, sales commissions, and hourly labor. Understanding this split lets you calculate your break-even point (the minimum revenue needed to cover all costs) and make smarter decisions when sales slow down.

Break-even = Fixed Costs / (Price per unit - Variable cost per unit). A restaurant with $15,000/month in fixed costs, $12 average check, and $5 in variable food/labor costs needs to serve at least 2,143 covers per month just to break even. Know your break-even number and track it weekly — every sale above break-even generates pure profit.

A Profit and Loss (P&L) statement summarizes your revenue, expenses, and profit over a time period — it is the single most important financial document you will read monthly. Structure: Revenue → Gross Profit (revenue minus COGS) → Operating Expenses → Net Profit (or Loss). QuickBooks Online generates this automatically if you keep your books current; review it on the 5th of every month for the prior month.