Gain / Profit / Earnings

Gain is the magic word, the profit for which, after all, we undertake business. The amount of this is given by the difference between income and expenses, in which we have already calculated everything to be paid, from overhead to taxes. If the end result is positive, we can basically be happy, and in some cases, one or two negative, loss-making years can also fit in.

Gain is very simply a revenues and the costs difference. If the former is greater than the latter, then this number is positive, which means that we have a profit. If the situation is reversed, then our loss arose. 

It is important that by gain we mean the remaining difference that is available after all kinds of payments, which is why it is not appropriate to confuse the with a margin. From the total sales revenue, not only wages, overhead costs, transport must be deducted, for example, but at the end all taxes and everything else too. If after this there is still some money, from which you no longer have to pay anything, that is gain. 

What we do with this profit is up to us and our co-owners. We can take it out as a dividend and we can spend it, fill it up to accumulated profit reserve, can be used for investments. 

The lucky thing is that it is always positive, that is, we make a profit on the business every year. Of course, this doesn't always work out, for example at a start-up business it is quite normal for them to have a loss due to the initial difficulties and expenses. Depending on the type of activity we started, the negative result is in the first year or one innovative startup can be tolerated even for a few years. 

Even in well-established companies, it sometimes happens that one unprofitable year slips by. Such a case is when the business is very dependent on acquisition prices, such as an agricultural company, which happens to be able to sell its crops very cheaply in one year. For this reason, in certain sectors, they say that profitability should not be interpreted on an annual basis, but rather in a 5-10-year time frame, that is, the math should be calculated over several years, which also includes one or two weak years. Agriculture is typically such a sector.

If we plan to one day we are leaving the company, it doesn't hurt if we know that investors are increasing profits, or the indicator of this indicators they really love it. Of course, there can be smart buyers who a shareholder value when examined, they can see the fantasy even in a company showing declining results, but the projection of growth and rising gain with it appears in the minds of most investors when they look at the books of a company.