Case Study: Is this business profitable?

<p>Profit and profit margins are the most important business metric yet no one teaches them (except me) and no one talks about them in the right way</p><p>Revenues are not profits – anyone who says this is not an experienced, educated, and authentic business coach. </p><p>  -- Revenues are money that comes into your business via sales</p><p>  -- Profits are what is left over after expenses</p><p>Profits formula is <strong>Profit = revenue – expenses</strong> -  this is accounting 101</p><p>Revenue is dependent on sales and how you market your business</p><p>Expenses are what you spend in and on your business</p><p>            Expenses include your salary, cost of running your business, equipment, utilities, and more</p><p>Expenses are fixed or variable – marketing is a variable cost, your course platform is a fixed cost</p><p>Profits are what is left over after expenses</p><p>Sell $100 with expense of $99  your profit is $1.00 This is your COGS – cost of goods sold. It is an important metric in your business as it tells how much you are spending per sale – you want this number to be low so your profits are high</p><p> </p><p>Profit margin is the percentage of profits you can expect based on sales. You want this number to be high. In an online business with few overhead costs and good management of your expenses, you should expect a profit margin of 50% or more</p><p>Here is the business information and background for this Profit Case Study:</p><p>$3.2 million in sales</p><p>$1.5 million spent on ads</p><p>$170,000 in profit</p><p>$1.93 million in incidental costs (fixed and variable)</p><p>That’s a .05% profit margin and it’s terrible for an online business</p><p>What can you expect?</p><p>$497 course price x 100 people   is $49,700</p><p>Costs:  $97/month for the course platform   $200 marketing</p><p>Administration costs for help at $40 per hour, 20 hours is $800. I manage my administrative staff and they work on very specific tasks, which means they do work they enjoy and have the skills for and do not spend t