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Revenue vs profit: one store does a million dollars a year and keeps about $20,000. Another does $200,000 and keeps about $50,000. Melia Moore follows the money down both of them, line by line, from cost of goods to ad spend to overhead, to show why revenue is the easiest number in your business to grow and the least honest.
The first split between an owner and an operator is one question: what did it keep? This episode adds the second half of the series' filter. A move can lift a lever and still cost you money, and discounting is the classic case. Revenue is an input, not the goal. For the rest of Ecom by the Numbers, profit is the lens.
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Episode page: https://ecomprofitably.com/podcast/revenue-vs-profit/
Ecom by the Numbers is brought to you by ecomprofitably: https://ecomprofitably.com/
An ecommerce podcast for small business and Shopify store owners who are making sales but flying blind on the money. Host Melia Moore shows you how to see your whole business as one equation: traffic × conversion × average order value × frequency = revenue, minus what it costs = profit. Every episode kills a shiny object and hands you the honest math, from the four growth levers to margin, customer acquisition cost, the P&L and cash, so you can run your store like an owner instead of an operator. Mathy, but not accounting. A show from ecomprofitably.
You're listening to E-comm by the Numbers. Episode Two. Let me tell you about two stores. The first one does a million dollars a year. The second one does two hundred thousand. And the second owner takes home more money than the first. Not a little more.
More than twice as much. Same kind of products. Same kind of customer. The difference was never revenue. I'm Melia Moore. This is E-comm by the Numbers, a show we make at e-comm profitably for the owner who is doing real sales and still isn't sure the business is actually working.
Here's the thing about revenue. It is the number everyone chases, and it is the number that lies to you the most. It's the first thing another founder asks you. How much are you doing? It's the milestone you screenshot. The number you'd say out loud at a dinner party.
Six figures, seven figures. It feels like the scoreboard. And I understand why. Revenue is exciting, and it's public, and it goes up whenever you're busy, which makes the busy-ness feel like proof that it's all working. But revenue is only four of the five numbers we talked about last episode. Traffic, times conversion, times average order value, times how often they come back.
That's revenue. And then there's the fifth number, the one nobody screenshots. Your costs. Revenue minus costs is profit, and profit is the only number that has ever paid anyone's rent. So let me go back to those two stores, because the math is the whole point. Store one.
A million dollars in revenue. That sounds like a real business, and in a way it is. But almost all of that traffic is paid. Nearly every order came from an ad. And to keep the orders coming, this owner discounts constantly. There's always a sale running.
So let's follow the money down. Of that million in revenue, the cost of the products themselves eats about sixty percent. That leaves four hundred thousand. Then the ads that bought all that traffic take another two hundred and fifty thousand. Now we're down to a hundred and fifty. Then the platform fees, the shipping, the apps, the one part-time helper, the rent on the little warehouse space.
By the time it all clears, this million-dollar store put about twenty thousand dollars in its owner's pocket. For a full year of work. Two percent. Now store two. Two hundred thousand in revenue. One fifth the size.
But this owner sources better and almost never discounts, so the products only cost about forty percent. That leaves a hundred and twenty thousand. Most of the customers come back on their own, through email, so the marketing bill is small, maybe thirty thousand. Overhead, another forty. And this owner takes home around fifty thousand dollars. Look at those two side by side.
One store did five times the revenue of the other. And the smaller one paid its owner more than twice as much. That is the entire reason revenue is not the point. Revenue is the easiest number in the whole equation to grow, and the least honest. You want more revenue? Buy more traffic.
Run a bigger sale. Both of those will push the top line up tonight. And both of them can quietly make you less money while they do it. This is the first place an owner and an operator split. An operator looks at the million-dollar store and sees success. An owner looks at it and asks a different question.
Okay, but what did it keep? That question, what did it keep, is the beginning of thinking like an owner. And it's a question the revenue number will never answer for you, because revenue is built to look good all on its own. Remember the filter from last episode. Every decision runs through the four levers. But there's a second half to that filter, and this is it.
A move can lift a lever and still hurt you, if it costs more than it brings in. Discounting lifts conversion. More people buy when it's cheaper. It moves a real lever. And it can still be the exact thing that's slowly draining the business. So the levers tell you what a decision touches.
Profit tells you whether it was worth touching. Okay, so let me talk about what actually changes when profit becomes the goal instead of revenue. Because it is not a small adjustment. It reorganizes almost every decision you make. When revenue is the goal, every question is about more. More traffic, more channels, more launches, more sales.
When profit is the goal, the questions get quieter, and a lot more useful. Not, how do I get more orders. But, does each order actually make money, and how much. Here's what that looks like in practice. The revenue owner sees a slow week and runs a twenty-percent-off sale to hit the number. The profit owner sees the same slow week and asks whether twenty percent off even leaves anything after the cost of the product.
Sometimes the answer is that a discount that big means every order loses money. And that's a sale you're better off never running, no matter what it does to the top line. This is the shift we spend most of our time on at e-comm profitably. Getting an owner to stop asking how do I grow the number, and start asking which parts of this business actually make money. Because once you know that, growth gets simple. You do more of what's profitable, and less of what isn't.
Most stores are doing the exact opposite without realizing it. They're scaling the parts that lose money, because those parts happen to produce the most revenue. And I want to be fair here. Revenue is not useless. You cannot have profit without it. A business doing no revenue isn't a lean, profitable machine.
It's a hobby. So this is not me telling you revenue doesn't matter. It's me telling you revenue is an input, not the goal. It's the first number in the equation, not the last one. For the rest of this series, profit is the lens. Every lever we pull, we're going to ask the same two questions.
Does this move one of the four numbers. And after costs, does the business actually keep more than it did before. That second question is the one almost no growth advice online will ever ask you. It's most of what makes this show different. So here's the thing to sit with until next time. Revenue is what you tell people at a dinner party.
Profit is what actually pays you. A million dollars that keeps twenty thousand is a worse business than two hundred thousand that keeps fifty. We're going to spend this entire series on the second number. I'm Melia Moore. This was E-comm by the Numbers. The top line was never the scoreboard.
What you keep is. I'll see you next time.