Does revenue equal gross profit for info product business?
What about web-hosting fees? Cost of Internet service? Cost of computer equipment to do the work? Amortized cost of development? Time for support calls/email? Phone service used for sales? Advertising/marketing expenses? Look hard--I bet there are some costs.
Such activity is normally referred to as bartering income. From the IRS site - You must include in gross income in the year of receipt the fair market value of goods or services received from bartering. Generally, you report this income on Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship), or Form 1040, Schedule C-EZ (PDF), Net Profit from Business (Sole Proprietorship). If you failed to report this income, correct your return by filing a Form 1040X (PDF), Amended U.S. Individual Income Tax Return. Refer to Topic 308 and Amended Returns for information on filing an amended return. That would be like requiring the IT department in you company to be self sufficient.  You're IT department doesn't exist to earn a profit.  It exists to enable the rest of the company to earn a profit.  Your IT department runs a deficit, it sucks money from the bottom line of your company.  Hopefully, it boosts other departments in your company like sales, or engineering, and enables them to make more money than IT consumes. I think his conclusions apply only to sole proprietorships that provide cheap, commoditized services.  My story is a little different.  I've been a sole proprietor, writing software and providing services related to that software, for 15 years.  Over that time, I closed two IP sales to large competitors.  One of those was an 8-figure deal.  I never provided commodity services, saved as much of my consulting income as possible, toughed out the fallow periods, invested years of unpaid time inventing new ideas and writing new software, treated my customers very well, and always negotiated hard for value. you:  &gt;Pleading ignorance, what is the difference between revenue and sales?   me:  &gt;[ignorance doesn't cut it in your case](http://lmgtfy.com/?q=sales+vs+revenue)  Or does your ignorance include ignorance of hyperlinks too?   Hint: click the link and use this problem solving approach in the future when you again encounter something you don't understand. "In general, when dealing with quantities like net income that are not restricted to being positive, ""percentage change"" is a problematic measure. Even with small positive values it can be difficult to interpret. For example, compare these two companies: Company A:  Company B:  At a glance, I think most people would come away with the impression that both companies did badly in Y2, but A made a much stronger recovery. The difference between 99.7 and 99.9 looks unimportant compared to the difference between 100,000 and 40,000. But if we translate those to dollars: Company A: Y1 $100m, Y2 $0.1m, Y3 $100.1m Company B: Y1 $100m, Y2 $0.3m, Y3 $120.3m Company B has grown by a net of 20% over two years; Company A by only 1%. If you're lucky enough to know that income will always be positive after Y1 and won't drop too close to zero, then this doesn't matter very much and you can just look at year-on-year growth, leaving Y1 as undefined. If you don't have that guarantee, then you may do better to look for a different and more stable metric,  the other answers are correct: Y1 growth should be left blank. If you don't have that guarantee, then it might be time to look for a more robust measure, e.g. change in net income as a percentage of turnover or of company value." You do actually have some profits (whatever is left from donations). The way it goes is that you report everything on your Schedule C. You will report this: Your gross profits will then flow to Net Profit (line 31) since you had no other expenses (unless you had some other expenses, like paypal fees, which will appear in the relevant category in part II), and from line 31 it will go to your 1040 for the final tax calculation. "Neither. Why would you have to classify startups as value or growth?  A startup is its own category.  You can find startups at ""classic"" valuations (price/book...  Etc) that would make investors' eyes water...   But that happens because many startups are early stage and so revenue or book value or other classic valuations don't quite suit." The primary revenue streams are site management and recycling.  We've basically fallen off the face of Google with the last website redesign because the person had absolutely no clue what they were doing and used a template.  So we're getting torn to shreds by companies that have properly designed websites and a social media presence.  Because who the hell looks in a newspaper anymore for business services? "I don't think they ""actually"" turned a profit, did they?  As I understand it, this is an accounting method/trick, it's not as if they generated more income by using this system.  They just made their monetary value visible rather than implicit.  Which is not the same as turning a profit... or am I missing something?" "Capitalization rate and ""Net Profit margin"" are two different things. In Capitalization rate note that we are taking the ""total value"" in the denominator and in Net profit margin we are taking ""Revenue/Sales"".  Capitalization Rate: Capitalization Rate = Yearly Income/Total Value For example (from Investopedia: ) if Stephane buys a property that will generate $125,000 per year and   he pays $900,000 for it, the cap rate is:   125,000/900,000 = 13.89%. Net Profit margin: Net Profit margin = Net Profit/Revenue For example (from finance formulas): A company's income statement shows a net income of $1 million and   operating revenues of $25 million. By applying the formula, $1 million   divided by $25 million would result in a net profit margin of 4%.   Although the formula is simplistic, applying the concept is important   in that 4% of sales will result in after tax profit." The website likely has no differentiation. I am hoping, however, the service does.   I'm not looking to break down a fledgling business plan, I am just looking for information on how and where to build or buy a website that performs thusly:  Company creates account and posts the service they can provide, Consumer applies for said service, I deal with some required middle-man work which is at the cost of the consumer. I'll address one part of your question: There are other taxes that companies pay as well, such as income tax, but don't charge to the customer as a fee. So, why are gross receipts taxes charged to the customer? Things like income tax can't be passed on to the consumer in a direct way, because there's no fixed relationship between the amount of the tax and the price of an individual product.  Income tax is paid on taxable income, which will incorporate deductions for the costs the company incurred to do business.  So the final amount of corporate income tax can depend on things unrelated to the price of goods sold, like whether the business decided to repave their parking lot. Gross receipts taxes, by definition, are charged on the total amount of money taken in, so every dollar you spend on an item at the store will be subject to the gross receipts tax, and hence will cost the business 7 cents (or X% where X is the tax rate).  This means there is a direct link between the price you pay for an individual item and the tax they pay on that transaction.  The same is true for sales taxes, which are also often added at the time of sale. Of course, businesses could roll all of these into the posted price as well.  The reason they don't is to get their foot in the door and make the price seem lower: you're more likely to buy something if you see it for the low, low, one-time-only price of $99.99, act now, save big, and then find out you owe an extra $7 at the register than if you saw $107 on the price tag. "This may be closed as not quite PF, but really ""startup"" as it's a business question.  In general, you should talk to a professional if you have this type of question, specifics like this regarding your tax code. I would expect that as a business, you will use a proper paper trail to show that money, say 1000 units of currency, came in and 900 went out. This is a service, no goods involved. The transaction nets you 100, and you track all of this. In the end you have the gross profit, and then business expenses. The gross amount, 1000, should not be the amount taxed, only the final profit." Fair enough and I appreciate the advice. But I think in some cases we have a duty to point out contradictory statements, especially if they could be misleading to the average person. I don't want some poor kid who scraped together a few bucks, sees the big revenue numbers and assumes it's a sure thing. I don’t get how companies can keep saying this. Profit is by definition money you didn’t spend on anything (like research). I realize that profit could be used on research in future years, but presumably you will also have excess income in future years to use for that expense. That’s a bum deal though because you will have to pay 35% tax. Making a profit at all means you chose not to invest that money  in research but instead to bank the money (pay shareholders).