Revenue is the starting point of every P&L. But revenue alone tells you very little. A business doing $2 million in revenue that barely breaks even is in worse shape than a business doing $400,000 with a 20% margin.
Revenue vs. cash received
On cash-basis accounting, revenue is recorded when payment is received — not when the sale is made or the invoice is sent. This keeps your books aligned with what's in your bank account.
The revenue trap
Greg Crabtree is direct: chasing revenue without understanding what it costs to generate is one of the most common and dangerous mistakes small business owners make. A contract that generates $100,000 in revenue but requires $95,000 in direct costs isn't a success — it's a distraction. Revenue matters; profitability per dollar of revenue matters more.
Revenue and the LER
Revenue doesn't appear directly in the Labor Efficiency Ratio, but it drives gross profit. Growing revenue while holding direct costs steady improves both gross profit and LER — which is the healthiest form of growth.
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