Revenue Is Growing. So Why Is the Business Getting Weaker?

A company can double its sales and still get weaker every month. Learn revenue, gross profit, operating profit and margins with two coffee roasters, and you'll never read a sales number the same way again. Revenue is the number everyone sees, and the one that lies the most. This video follows two small coffee roasters: Maya sells $1 million a year, Leo sells $2 million. Step by step you'll learn what revenue measures (and what it doesn't), gross profit and gross margin, operating profit and operating margin, and profit per unit. Then Leo's numbers are revealed: twice the sales, a 3% operating margin, and less than fifty cents on every bag. We follow where his margin went (discounts, a supermarket contract, higher costs, new expenses), why thin margins are dangerous when prices rise and cash gets tied up, why nobody notices, how Walmart and Apple show that the right margin depends on the business, and five ways to check your own. At the end: which company is really in better shape? Chapters 0:00 Twice the sales, less on every sale 1:48 Two coffee roasters 3:12 Revenue is not profit 4:37 Gross profit and gross margin 6:25 Operating profit and operating margin 8:04 Leo's numbers 9:50 Where the margin went 12:17 Why thin margins are dangerous 14:30 Why nobody notices 15:37 Walmart vs Apple 17:04 How to check your own business 18:13 Maya or Leo? 19:09 Big vs strong Numbers used in the examples: Maya and Leo are illustrative examples, not real businesses. Maya: 50,000 bags at $20 = $1,000,000 revenue; cost of goods sold $9 a bag = $450,000; gross profit $550,000 (55%); operating expenses $350,000 (rent $60,000, salaries $220,000, marketing $30,000, other $40,000); operating profit $200,000 (20%), $4.00 a bag. Leo: 125,000 bags at an average $16 = $2,000,000 revenue; cost of goods sold $10.40 a bag = $1,300,000; gross profit $700,000 (35%); operating expenses $640,000 ($350,000 + ads $150,000 + second warehouse $60,000 + two hires $80,000); operating profit $60,000 (3%), $0.48 a bag. Last year Leo's numbers were about the same as Maya's. Price shock: +$0.50 a bag costs Maya $25,000 (profit $175,000) and Leo $62,500 (a $2,500 loss). At 3%, earning $200,000 takes about $6.7M in sales. Sources: Walmart Inc., Form 10-K for the fiscal year ended Jan 31, 2025 (SEC EDGAR): total revenues $681.0B, gross profit rate 24.1%, operating income $29.3B. Apple Inc., Form 10-K for fiscal 2024 (SEC EDGAR): net sales $391.0B, gross margin 46.2%, operating income $123.2B. For education only. Not financial, tax or legal advice. If this helped, subscribe. Next: how to raise prices without losing your best customers. #business #finance #smallbusiness