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Cost of goods and your top line revenue

Wednesday, January 25, 2023

When calculating profit, it's important to separate the cost of goods sold (COGS) from the revenue. COGS represents the direct costs associated with producing and delivering a product or service, such as the cost of materials, labor, and manufacturing overheads. Subtracting COGS from revenue gives you the gross profit, which represents the money available to cover other expenses and generate net income.

Profit First is a book and method that emphasises the importance of paying yourself first and ensuring that you have a consistent and healthy profit margin, by taking your cost of goods sold (COGS) off of your top line revenue. So, by doing this it separates the revenue that is meant to cover your business expenses and profit, while taking the COGS directly off the top to show you the real money that you have left over.

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