People keep mixing up cash flow and profit like they are the same thing

I see it all the time in small business groups. A guy on a forum last week said his side hustle made $15k last month and called it profit. But he forgot to subtract his material costs and the $400 he paid for a booth at a local craft fair. Cash flow is what comes in the door, profit is what you keep after every dollar goes out. Has anyone else had to explain this to a new business owner who thought they were making bank?

2 comments

2 Comments

daniel_lane3022d agoMost Upvoted

Yeah it's rough watching people learn that lesson the hard way... I've had to walk a few friends through that same conversation and you can see the moment it clicks for them.

morgan.logan22d ago

lol I mean technically if you're a one person show and you're not paying yourself a salary then cash flow kinda IS profit. All that money is just sitting in your account either way.