September 25, 2025 • 10 mins
Revenue looks good on paper, it sounds impressive at conferences, and it makes headlines in the business world. Revenue grabs attention, but it’s profit and cash flow that keep the company alive.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome back to
(00:00):
The Wealth Effect.
Today I want to talk about one of the
most celebrated illusions in business and
personal finance.
One of the most misused and overhyped
numbers in the business conversation.
It's the illusion
of revenue.
That big, shiny number
everyone loves to show off.
That dollar sign that looks great on
(00:21):
Instagram bios, on LinkedIn posts.
That we made seven figures last year,
which is a humble brag that gets applause,
attention.
And blind
admiration.
But here's the thing.
Revenue is a lie.
It's not a
malicious one.
It's not deception,
but a distraction.
A shiny number.
(00:41):
A number that presents as one of the
most meaningful number in a company.
Revenue can be impressive
because it implies success.
It implies scale.
It implies status.
But when you really look at it,
when you take away the glamour,
what you often find underneath,
is something fragile, chaotic,
(01:02):
and even dangerous
sometimes.
In today's episode, we'll break down why
revenue doesn't mean what people think it
means, and what
does matter more.
Because numbers that impress aren't
always the numbers that matter.
Let's fill
your pocket.
We live in a society that
idolizes big numbers.
The bigger,
the better.
Flashier is
(01:22):
the goal.
The top line becomes
the headline.
The appearance of girls becomes more
important than the
structure underneath it.
And you see
it everywhere.
The headlines reading, 1.2 million
in revenue in our first 18 months.
Half a million in course
sales last quarter.
$100,000 at
(01:42):
launch week.
Those numbers get the heart pumping,
the mind racing, and it's intoxicating.
But revenue
is not profit.
Revenue isn't
real wealth.
Revenue is just
one number.
It's a gross number,
not a net one.
It's the total of what comes in, but
it tells you absolutely nothing about
(02:03):
what went out.
And a lot goes out.
For most companies, more
goes out than comes in.
You can bring $1 million in and
still live paycheck to paycheck.
You can have a booming revenue
and still be drowning in debt.
Revenue is attractive
because it's simple.
It doesn't
need context.
It's just
a snapshot.
(02:24):
But like all snapshots,
it can be misleading.
It doesn't show the bleeding in the
background from payroll, the bloated ad
spend, the return rates, the loans, the
stress, and the silent anxiety behind
the scenes.
It's only an illusion when
it's mistaken for success.
And that illusion
(02:44):
just feeds the ego.
When you chase revenue without really
knowing what it is, you end up building a
business around performance
instead of profit.
You want to grow.
You want to reach
more people.
You want to hit
bigger milestones.
So you take on more clients,
launch more products, scale harder.
You hire quickly.
(03:05):
You spend more on ads, pay for tools,
consultants, team members, bonuses,
marketing funnels, all to
chase the top line growth.
For the moment, it
sounds like a good idea.
Until it's not.
You begin to
realize something.
You're working
more, not less.
You're paying more to people
and taking home less yourself.
(03:27):
You're doing more, but you feel
disconnected from the company.
And worst of all, you
can't even slow down.
This is what happens when businesses
are built on revenue to
increase their valuation
instead of value.
You're building to not
look like you're failing.
You're building so your numbers
don't fall on your next quarter post.
(03:48):
You're building to satisfy an
image and not the company mission.
When you chase revenue, you often end up
serving something that lies outside of
your control.
The market reaction, the algorithm's
attention, the people's applause.
And in doing so, you
sacrifice your own freedom.
And when that's all gone, reality is
what remains when the performance ends.
(04:12):
Reality is what your business looks like
when the cameras are off, when the email
list quiets, and
your growth flattens.
You have to face the
structure you've built.
Business's health isn't measured by
scale, but its ability to sustain itself.
It's about how much of that revenue
turns into retained earnings.
(04:33):
It's about how well your system
works when you step away.
The entrepreneurs running $5 million
companies might feel more trapped than
freelancers
making $120,000.
With no staff and total control of their
schedule, sometimes a lean
business is the free one.
The quiet brand is
the peaceful one.
(04:54):
The small venture might
be the most profitable.
Don't fall for the trap that
larger revenue equals success.
Because it doesn't.
And one of the most important metrics
for a business is actually profit.
You can have a million dollars in sales,
but if you're spending $1.1 million to
make that happen, you're
not building a business.
(05:14):
You're just digging
yourself a hole.
And the crazy part is that from
the outside, everyone applauds you.
Wow, a million
dollar business.
But inside the books,
you're just bleeding money.
Because when you keep
money, you have options.
You can reinvest, you can expand, you
can protect yourself
through tough times.
(05:35):
Without profit, you're chained to
the hamster wheel, running faster,
harder, and never
moving forward.
There's a reason why informed investors
obsess over net profit
instead of raw sales.
Because profit is the
scoreboard of its survival.
It shows whether your
business model actually works.
Whether you're building a money machine
(05:57):
or just sitting on money for attention.
When times are good, no
one talks about margin.
Revenue is up, customers are flowing in,
and it feels like the
growth will never stop.
Margins are what protects you
when the economy is burning down.
They're the space between what
you earn and what you spend.
(06:17):
Higher margins
means protection.
If your business only survives when the
economy is perfect, you
don't have a business.
You have a
ticking time bomb.
Margin allows you to adapt, to reinvest,
to withstand bad quarters and unexpected
economic shocks.
Take the restaurant
industry for example.
(06:37):
Most restaurants operate on
razor thin margins, often 3-5%.
That means for every $100 they bring
in, $3-4 is what's left after rent,
payroll, and
food costs.
So when the pandemic hit and traffic
dropped to zero, thousands
of restaurants collapse.
Now compare that to
(06:58):
the software industry.
Once the code is built, every new customer
costs almost nothing to
add them to the service.
That's why many tech companies
have margins of 70-80%.
And when downturns come, they just
tighten their belt, slow their hiring.
But they don't
collapse overnight.
Because their margin gave them
(07:19):
time to readjust their strategy.
With healthy margins, you can take
profits and build something new entirely.
A business running at 2%
margins is consistently anxious.
Every decision made
is in a panic mode.
Every risk feels
catastrophic.
But with healthier margins, it gives you
(07:39):
room to make bad decisions, to say no to
some clients, and to take only
opportunities that are
right for the company.
A good margin says you
won't run off the cliff.
And profit is just
the idea on paper.
While cash flow is the reality in the
bank, you can be profitable and still go
broke if all your money gets stuck in
(08:01):
accounts receivable, tied up in inventory,
or any other account sitting somewhere
where you can't even touch it or use it.
And this is what leads many businesses
to go broke, even when they are on paper
profitable.
Cash flow is the heart
and blood of your company.
It's what pays employees,
suppliers, rent, and taxes.
(08:22):
So you can't
ignore it.
You can't pay your landlord
with projected revenue.
You can't tell your staff,
our margins are looking good.
So just wait another six months
till you can clear your paycheck.
Payroll
doesn't wait.
Bills don't wait.
That's why many businesses collapse in
the midst of what looks like success.
(08:43):
They're growing, they're selling,
and they're even profitable.
But just on paper.
And once they run out of
cash, the lights go off.
The company
shuts down.
Profit, just like revenue,
is a snapshot as well.
Although profit is a
better looking snapshot.
But cash flow
is a video.
Profit tells you how the
(09:03):
picture looks in the moment.
Cash flow shows you how money actually
moves through your business day by day,
week by week.
And if that flow stops, and if that
flow stops, it's probably
time to remove yourself
from Google.
Cash flow doesn't let you hide behind
projections, metrics,
or accounting tricks.
(09:25):
Either the money is
there, or it's not.
And if it isn't,
nothing else matters.
Revenue sparkles
and draws a crowd.
But when the noise fades, when the
audience stops clapping, when the rush of
the numbers wear
off, what's left?
Hopefully profit.
Hopefully cash
in the bank.
Because those
aren't illusions.
(09:46):
Those are things that keep businesses
running long after their hype fades.
Because in the end, the goal isn't to
impress the world with big numbers.
The goal is to grow your real
wealth and your real company.
Until next time.
Welcome back to
(00:00):
The Wealth Effect.
Today I want to talk about one of the
most celebrated illusions in business and
personal finance.
One of the most misused and overhyped
numbers in the business conversation.
It's the illusion
of revenue.
That big, shiny number
everyone loves to show off.
That dollar sign that looks great on
(00:21):
Instagram bios, on LinkedIn posts.
That we made seven figures last year,
which is a humble brag that gets applause,
attention.
And blind
admiration.
But here's the thing.
Revenue is a lie.
It's not a
malicious one.
It's not deception,
but a distraction.
A shiny number.
(00:41):
A number that presents as one of the
most meaningful number in a company.
Revenue can be impressive
because it implies success.
It implies scale.
It implies status.
But when you really look at it,
when you take away the glamour,
what you often find underneath,
is something fragile, chaotic,
(01:02):
and even dangerous
sometimes.
In today's episode, we'll break down why
revenue doesn't mean what people think it
means, and what
does matter more.
Because numbers that impress aren't
always the numbers that matter.
Let's fill
your pocket.
We live in a society that
idolizes big numbers.
The bigger,
the better.
Flashier is
(01:22):
the goal.
The top line becomes
the headline.
The appearance of girls becomes more
important than the
structure underneath it.
And you see
it everywhere.
The headlines reading, 1.2 million
in revenue in our first 18 months.
Half a million in course
sales last quarter.
$100,000 at
(01:42):
launch week.
Those numbers get the heart pumping,
the mind racing, and it's intoxicating.
But revenue
is not profit.
Revenue isn't
real wealth.
Revenue is just
one number.
It's a gross number,
not a net one.
It's the total of what comes in, but
it tells you absolutely nothing about
(02:03):
what went out.
And a lot goes out.
For most companies, more
goes out than comes in.
You can bring $1 million in and
still live paycheck to paycheck.
You can have a booming revenue
and still be drowning in debt.
Revenue is attractive
because it's simple.
It doesn't
need context.
It's just
a snapshot.
(02:24):
But like all snapshots,
it can be misleading.
It doesn't show the bleeding in the
background from payroll, the bloated ad
spend, the return rates, the loans, the
stress, and the silent anxiety behind
the scenes.
It's only an illusion when
it's mistaken for success.
And that illusion
(02:44):
just feeds the ego.
When you chase revenue without really
knowing what it is, you end up building a
business around performance
instead of profit.
You want to grow.
You want to reach
more people.
You want to hit
bigger milestones.
So you take on more clients,
launch more products, scale harder.
You hire quickly.
(03:05):
You spend more on ads, pay for tools,
consultants, team members, bonuses,
marketing funnels, all to
chase the top line growth.
For the moment, it
sounds like a good idea.
Until it's not.
You begin to
realize something.
You're working
more, not less.
You're paying more to people
and taking home less yourself.
(03:27):
You're doing more, but you feel
disconnected from the company.
And worst of all, you
can't even slow down.
This is what happens when businesses
are built on revenue to
increase their valuation
instead of value.
You're building to not
look like you're failing.
You're building so your numbers
don't fall on your next quarter post.
(03:48):
You're building to satisfy an
image and not the company mission.
When you chase revenue, you often end up
serving something that lies outside of
your control.
The market reaction, the algorithm's
attention, the people's applause.
And in doing so, you
sacrifice your own freedom.
And when that's all gone, reality is
what remains when the performance ends.
(04:12):
Reality is what your business looks like
when the cameras are off, when the email
list quiets, and
your growth flattens.
You have to face the
structure you've built.
Business's health isn't measured by
scale, but its ability to sustain itself.
It's about how much of that revenue
turns into retained earnings.
(04:33):
It's about how well your system
works when you step away.
The entrepreneurs running $5 million
companies might feel more trapped than
freelancers
making $120,000.
With no staff and total control of their
schedule, sometimes a lean
business is the free one.
The quiet brand is
the peaceful one.
(04:54):
The small venture might
be the most profitable.
Don't fall for the trap that
larger revenue equals success.
Because it doesn't.
And one of the most important metrics
for a business is actually profit.
You can have a million dollars in sales,
but if you're spending $1.1 million to
make that happen, you're
not building a business.
(05:14):
You're just digging
yourself a hole.
And the crazy part is that from
the outside, everyone applauds you.
Wow, a million
dollar business.
But inside the books,
you're just bleeding money.
Because when you keep
money, you have options.
You can reinvest, you can expand, you
can protect yourself
through tough times.
(05:35):
Without profit, you're chained to
the hamster wheel, running faster,
harder, and never
moving forward.
There's a reason why informed investors
obsess over net profit
instead of raw sales.
Because profit is the
scoreboard of its survival.
It shows whether your
business model actually works.
Whether you're building a money machine
(05:57):
or just sitting on money for attention.
When times are good, no
one talks about margin.
Revenue is up, customers are flowing in,
and it feels like the
growth will never stop.
Margins are what protects you
when the economy is burning down.
They're the space between what
you earn and what you spend.
(06:17):
Higher margins
means protection.
If your business only survives when the
economy is perfect, you
don't have a business.
You have a
ticking time bomb.
Margin allows you to adapt, to reinvest,
to withstand bad quarters and unexpected
economic shocks.
Take the restaurant
industry for example.
(06:37):
Most restaurants operate on
razor thin margins, often 3-5%.
That means for every $100 they bring
in, $3-4 is what's left after rent,
payroll, and
food costs.
So when the pandemic hit and traffic
dropped to zero, thousands
of restaurants collapse.
Now compare that to
(06:58):
the software industry.
Once the code is built, every new customer
costs almost nothing to
add them to the service.
That's why many tech companies
have margins of 70-80%.
And when downturns come, they just
tighten their belt, slow their hiring.
But they don't
collapse overnight.
Because their margin gave them
(07:19):
time to readjust their strategy.
With healthy margins, you can take
profits and build something new entirely.
A business running at 2%
margins is consistently anxious.
Every decision made
is in a panic mode.
Every risk feels
catastrophic.
But with healthier margins, it gives you
(07:39):
room to make bad decisions, to say no to
some clients, and to take only
opportunities that are
right for the company.
A good margin says you
won't run off the cliff.
And profit is just
the idea on paper.
While cash flow is the reality in the
bank, you can be profitable and still go
broke if all your money gets stuck in
(08:01):
accounts receivable, tied up in inventory,
or any other account sitting somewhere
where you can't even touch it or use it.
And this is what leads many businesses
to go broke, even when they are on paper
profitable.
Cash flow is the heart
and blood of your company.
It's what pays employees,
suppliers, rent, and taxes.
(08:22):
So you can't
ignore it.
You can't pay your landlord
with projected revenue.
You can't tell your staff,
our margins are looking good.
So just wait another six months
till you can clear your paycheck.
Payroll
doesn't wait.
Bills don't wait.
That's why many businesses collapse in
the midst of what looks like success.
(08:43):
They're growing, they're selling,
and they're even profitable.
But just on paper.
And once they run out of
cash, the lights go off.
The company
shuts down.
Profit, just like revenue,
is a snapshot as well.
Although profit is a
better looking snapshot.
But cash flow
is a video.
Profit tells you how the
(09:03):
picture looks in the moment.
Cash flow shows you how money actually
moves through your business day by day,
week by week.
And if that flow stops, and if that
flow stops, it's probably
time to remove yourself
from Google.
Cash flow doesn't let you hide behind
projections, metrics,
or accounting tricks.
(09:25):
Either the money is
there, or it's not.
And if it isn't,
nothing else matters.
Revenue sparkles
and draws a crowd.
But when the noise fades, when the
audience stops clapping, when the rush of
the numbers wear
off, what's left?
Hopefully profit.
Hopefully cash
in the bank.
Because those
aren't illusions.
(09:46):
Those are things that keep businesses
running long after their hype fades.
Because in the end, the goal isn't to
impress the world with big numbers.
The goal is to grow your real
wealth and your real company.
Until next time.
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