Total Income VS Real Revenue

profit first Mar 04, 2022

Kelley from Profit Scale Thrive with another Profit First FAQ today's question.

What is the difference between total income and Real Revenue?

Well, total income is the top-line revenue of a business. It represents all cumulative sales, but real revenue is the total income minus the cost of materials, and subcontractors.

The business should only adjust to Real Revenue for Profit First purposes if a significant portion of operations requires materials and subcontractors, which is typically more than 20% of total income.

The rule of thumb is that if you are a service-based business with full-time and part-time employees do the Profit First process based on total income, but if you're a manufacturer, retailer, restaurant, or a service provider that delivers a significant portion of its services via subcontractors, you need to do Profit First process based on Real Revenue.

Please note that Real Revenue is similar to gross profit, but it's not the same.

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