Understanding Profit Income

It refers to the profit generated by selling goods or services for more than they cost to make or purchase. This is the point at which you can transition from employee to entrepreneur. Depending on your business model, this can be active or passive income. Previously, starting a business required a significant financial investment to purchase or manufacture the product. However, with the help of the internet, it has become much easier. The two types of profit income are Individual or small-scale profit income and business or highly scalable profit income. When you work on a small scale, you create the product yourself or manually flip products. Establishing a business and having a manufacturer provides scalable profit income.

Calculating profit income

Basic Mechanism: –

The basic mechanism of profit income is to sell a product at a higher cost than it was purchased for. Suppose you sell a large soft drink for Rs. 100 and you sell 500 of these per day. Then your revenue is Rs 50000 per day from soft drinks. Now suppose you pay Rs 25 for the cost of the soft drink syrup, ice, cups, water, etc. So, it costs you Rs 12500 for those 500 soft drinks.

You also pay Rs 1000 per day for the machine that people use to fill the cups with the soft drinks (you lease it for Rs 5000 per week) and another Rs 1000 to lease the cash register and other store furnishings and Rs 10000 per day to pay the clerk who takes the Rs 2000 per day for heating and cooling utilities. Plus Rs 1500 per day for insurance. That’s Rs 28000 per day of expenses. Then your profit before taxes is Rs 50000 minus Rs 28000 or post calculation Rs 22000. Assuming a 20% income tax your profit after taxes can be about Rs 18000.

Types of Profit Income: –

  1. Active profit Income: This is a type of profit income in which person is actively engaged throughout the process to earn profit. For example, you bought a cycle at RS 5000 and decide to find a buyer to sell it for Rs 6000. You will be actively engaged in finding the buyer for the product until the cycle is sold. Then you earn a profit of Rs 1000.
  2. Passive Profit Income: This is a type of profit income in which person is passively engaged to earn profit. For example, you get $100 in exchange for Rs 7000 and after 1 year let assume value of dollar in exchange for rupee increase to Rs 7500. So, the person will get profit of Rs 500 without actively engaging.

How hard is it to get started?

The amount of money a person wants to make determines how long it takes to get started. It is much easier to earn a smaller amount of money than it is to earn a large amount of money on a consistent basis. For example, selling a single bottle of Coca-Cola is simple, but selling 1000 bottles of Coca-Cola is extremely difficult. As a result, if you want to make a lot of money, you should do a lot of research before investing.

How hard is it to make first Rs.1000 from it?

It will be extremely difficult to earn the first Rs 1000 for it. For example, if you sell a bottle of coke for Rs 40 with a profit margin of Rs 4, you’ll need to sell 250 bottles to earn the first Rs 1000. If you are new to the market, selling 250 bottles is a difficult task; it can take 1-3 months to earn money.

How hard is it to maintain?

Maintaining profit is a simple task if the initial work is done well and the market is well built. However, people must adapt to changing market demands or they will lose their competitive advantage.

Success Story:

Radhakishan Damani

Radhakishan S. Damani is the founder of DMart and an Indian billionaire investor and businessman. His investment firm, Bright Star Investments Limited, also manages his portfolio. He makes the majority of his money from profit. They sell large quantities of products as DMart is known for selling products at low prices. Damani is the eighth richest Indian, with a net worth of Rs $14.5 billion.

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