Finance 101: Revenue, Expenses, and Estimating Growth

If you want to run a serious business, you must understand three basic financial ideas: revenue, expenses, and growth.

Let's keep it simple.

Revenue is the total money your business brings in from sales before any costs are removed. If you sell 100 items at £10 each, your revenue is £1,000.

Expenses are the costs required to run your business. This includes rent, stock, salaries, transport, marketing, electricity, data, and loan repayments.

Profit is what remains after you subtract expenses from revenue.

Profit = Revenue – Expenses.

If your revenue is £1,000 and your total expenses are £700, your profit is £300.

Now let's talk about estimating growth.

There are two simple ways to do this.

First, use historic growth. Look at your past numbers. If your revenue was £1,000 in January, £1,200 in February, and £1,400 in March, you are growing by roughly £200 per month. If that trend continues, you can project future months based on that average increase.

Second, use potential customer estimates.

Ask yourself: How many potential customers exist in my area? How many can I realistically reach? How often will they buy?

For example: If there are 500 potential customers, and you believe you can reach 20% of them, that is 100 customers. If each spends £15 per month, your potential monthly revenue is £1,500.

This is not exact, but it helps you plan.

Finance does not need to be complicated. You just need clarity.

This week, calculate your current monthly revenue and expenses. Then estimate your growth using either past data or customer potential. Numbers remove guesswork and give you control.