First Business Story
Revenue minus expenses, per-hour rates, and quick percentages of business numbers.
Best in your head · no pen, no calculator why?
the idea
Revenue is the money that comes in from sales. Expenses are what the business costs over the same period. Profit is revenue minus expenses: a café with $3,000 of sales in a week and $2,200 of expenses made $800. When expenses are bigger, the answer is a loss, written with a minus sign.
Per means divide by the thing after it. A percent is a share out of 100, and every share is out of a whole. When a group changes, use the whole the question names.
techniques
Per means divide
- Find the thing named after "per": hours, jobs or customers.
- Divide the revenue by that number.
- Half hours? Double both numbers first; the answer stays the same.
worked example
A job brings in $375 and takes 2.5 hours. What is revenue per work hour?
- Double both: $750 and 5 hours.
- $750 ÷ 5 = $150, the revenue per hour.
Answer: $150
Build a percent from 10%
- 10% is the amount ÷ 10, and 5% is half of that.
- 1% is the amount ÷ 100. 25% is a quarter, 50% a half, 75% three quarters.
- Combine the pieces: 15% is 10% plus 5%, and 30% is three lots of 10%.
worked example
A design studio asks for a 15% deposit on a $2,600 order. How much is the deposit?
- 10% of $2,600 is $260.
- 5% is half of that: $130.
- $260 + $130 = $390.
Answer: $390
Share of the starting group
- The whole is the group you started with. Leave out anything added later.
- Divide the part by that whole.
- Move the decimal point two places right for the percent: 0.15 is 15%.
worked example
A cleaning service starts the month with 40 clients. 6 of those 40 cancel, and 5 new clients sign up. What percentage of the starting clients canceled?
- The whole is the 40 starting clients. The 5 new ones are not in it.
- 6 ÷ 40 = 0.15 = 15%.
Answer: 15%
watch out for
- Treating revenue as money the business keeps. Expenses come out first, and only what is left is profit.
- Reading revenue per hour as what the owner earns per hour. Costs have not come out yet.
- Moving the decimal point the wrong way. Check with 10%: it is always the amount ÷ 10.
- Dividing by the ending count, or counting newcomers. The share is out of the starting group.
practice
Profit for the period
worked example
A bike shop brings in $4,400 of revenue this month. Its total expenses for the month are $5,150. What is its profit for the month? (Use a minus sign for a loss.)
Answer: -$750.00
- Profit = revenue − expenses for the same month: $4,400 − $5,150 = −$750.
- Expenses are bigger than revenue, so the result is a loss.
Revenue per hour
worked example
A design studio brings in $2,800 from 14 jobs. What is revenue per job?
Answer: $200.00
- Divide by the thing after "per": $2,800 ÷ 14 jobs = $200 per job.
- That is revenue per job, not profit per job.
Quick percent of a business number
worked example
An invoice for $1,780 is paid late and carries a 10% late fee. How much is the late fee?
Answer: $178.00
- Build it from anchors: 10% of $1,780 is $1,780 ÷ 10 = $178.