Revenue vs. Profit
In our ongoing series of financial terms for the fashion designer, we’re breaking down revenue and profit.
As a refresher:
Revenue ➡️ the amount of money generated by your business BEFORE expenses and taxes
Profit ➡️ the amount of money generated by your business AFTER expenses and taxes
Your profit is a more reliable indicator of how your business is doing! If you make 100,000 Euros in revenue and have 150,000 in expenses and taxes, your profit is -50,000 Euros. But if you make 60,000 Euros and your expenses and taxes are 30,000 Euros, you still have a profit of +30,000 Euros. It doesn’t matter how much your company makes – you ultimately want to look at your profit!
Here are some of the most typical categories in the fashion sector used in accounting for the inflow of money (a.k.a. making money!).
Retail sales: Selling your items in your store or on your website.
Wholesale sales: Selling your clothing items in bulk to another store or online retailer.
Workshops: Teaching others how to start their own clothing line or other aspects of the fashion industry.
Design and consulting: Helping others design clothing or consulting for other fashion businesses.
Extra shops: Opening other shops for your clothing will bring in additional revenue (but also calculate your expenses to ensure you’re making a profit).
Pop-ups: These one-off locations can generate a lot of revenue in a short amount of time.
Special projects: This revenue includes anything you don’t do in your day-to-day business ventures.
Loans: Taking out loans can inject cash into your business. Just be aware of the loan terms and interest rate, as you’ll need to repay the amount!
Grants: These are financial awards that usually don’t have to be repaid. You typically need to apply for grants, but if you win them, they will bring cash into your business.
Stay tuned for the next posting in this series all about…expenses!
Common income sources for fashion designers/retail stores
How to calculate profit out of revenue
