Back to: Business Numbers 101
WordPress To Wealth
Lesson: Business Numbers – Profitable Online Business
How to use the material in the course
- Watch the videos in full FIRST! You can watch in full screen mode.
- Do your prep work before opening your WP site
- Keep two tabs open. One for the video so you can go back and the other for your WordPress site (if the lesson calls for you to do something there) or your lesson document.
- Write down questions you have and schedule your one on one with Lisa! email@example.com
- If at anytime you run into an issue, email firstname.lastname@example.org
In This Lesson:
Here is your practice income statement.
You’ll use this throughout this lesson to understand what you need to sell in order to be a profitable business AND… for you to actually make a living!
Open and download as an Excel worksheet OR make a copy as a Google Sheet.
An income statement will allow you to calculate your sales, expenses and profit
Customer Acquisition Planning will help you plan the impact of getting new customers for a digital business
Sales forecasting sheet lets you break down sales by product so you understand which products or services are most profitable. If you business is a blog, you’ll need to either monetize through ads or sell some physical or digital products to make revenue.
Here we go!
Business success is measured by basic subtraction
Sales – Expenses = Profit
That’s how simple it is to understand if you’re making a profit. Now let’s see if you’re making a living
Are you making a living off your profit?
Profit (divided by) # of hours
If you’re making $100 a week in profit and working 50 hours a week, you’re not making a living. In fact, you at those numbers you still have a hobby.
Here’s an income statement you can use to calculate your expenses and forecast your revenue. Play around with this until it feels doable. Don’t guess, make educated assumptions based on your market opportunity and your capacity to produce.
Cost of Goods Sold (COGS)
Cost of Goods Sold are the expenses that directly relate to the creation of a product or service. Not included in this category are those costs that are needed to run the business. An example of COGS would be the cost of Materials, or the Direct Labor to provide a service.
An Expense is any cost incurred by the business.
Gross Margin is a percentage calculated by taking Gross Profit and dividing by Revenue for the same period. It represents the profitability of a company after deducting the Cost of Goods Sold.
Gross Profit indicates the profitability of a company in dollars, without taking overhead expenses into account. It is calculated by subtracting the Cost of Goods Sold from Revenue for the same period.
Net Income is the dollar amount that is earned in profits. It is calculated by taking Revenue and subtracting all of the Expenses in a given period, including COGS, Overhead, Depreciation, and Taxes.
Net Margin is the percent amount that illustrates the profit of a company in relation to its Revenue. It is calculated by taking Net Income and dividing it by Revenue for a given period.
Revenue (Sales) (Rev)
Revenue is any money earned by the business