The difference between real profit and imaginary profit in stores

Introduction

Your store's sales numbers may be high, and the number of daily invoices satisfactory, yet you find yourself struggling to cover expenses, or not seeing real profit growth.

Here lies the difference between Real profit Imaginary profit.

Many store owners fall into the trap of deceptive numbers that suggest success, while the reality is completely different.

In this article, we will reveal to you the fundamental difference between the two profits, with examples and practical tips that will help you evaluate your project more intelligently.

First: What is the real profit?

The real profit is what remains in your pocket after deducting all costs and expenses, whether direct or indirect.

Includes the following discounts:

• Cost of goods (COGS)

• Salaries

• Rent, electricity and water

• Administrative costs

• Taxes and zakat

• Marketing expenses

• Damage and waste

• Maintenance and consumption

Equation:

Real profit = revenue - all costs and expenses

Second: What is imaginary profit?

Imaginary profit is the difference between the selling price and the cost of the goods only, without taking into account the rest of the expenses. It is sometimes called Gross Profit.

Example:

• You sell a product for 100 riyals

• It cost you 60 riyals

• Apparent profit = 40 riyals

But you didn't count:

• 10 riyals rent

• 5 riyals electricity

• 5 riyals advertisement

• 3 riyals taxes

Real profit = 40 - (10+5+5+3) = 17 riyals

Third: Practical examples that illustrate the difference

Example 1: Restaurant

item

Value

Monthly sales

100,000 riyals

Cost of raw materials

40,000 riyals

Salaries

20,000 riyals

Rent and electricity

15,000 riyals

Marketing and advertising

5,000 riyals

Maintenance and tools

3,000 riyals

Imaginary profit

60,000 riyals

Real profit

17,000 riyals only

Example 2: A coffee shop

• Selling price for a cup of coffee: 18 riyals

• Direct cost: 6 riyals

• Advertising per order: 2 riyals

• Split rent: 2 riyals

• Actual net worth: only 8 riyals — not 12 as it appears at first glance

Fourth: Why do store owners fall into the trap of illusory profit?

1. Focus on the selling price and cost of the product only

2. Failure to record small operating expenses

3. Relying on monthly numbers without analyzing the details

4. Lack of regular accounting tracking

5. Blind trust in “bank transfers” as a sign of success

Fifth: Indicators that indicate that you are relying on an imaginary profit

Indicator

the explanation

High sales with weak liquidity

You sell a lot but have nothing to cover the liabilities

Earning profits from advertising

It relies on expensive marketing without considering its net impact

Lack of clarity about monthly expenses

You don't know how much you actually spend

Steady sales but declining profits

This means that costs rise silently

Sixth: How do you transform your accounts from imaginary profit to real profit?

✅ 1. Record all your expenses, whatever they are

• Water

• Internet

• Software subscriptions

• wrapping

• delivery

• Cashier discounts

✅ 2. Use the real profit calculation table

item

Value

Total sales

50,000

Cost of goods

20,000

Operating expenses

15,000

Marketing expenses

5,000

Real net profit

10,000

✅ 3. Review prices periodically

• Don't rely on "market" pricing alone

• Take into account the internal costs of your project

• Price event when costs rise

✅ 4. Do not confuse profit with sales

• Selling is not always a profit

• Sometimes discounts increase sales but decrease profits

Seventh: Tools that help you measure real profit

Tool

Interest

Google Sheets

Design a detailed spreadsheet to record all sales and expenses

Wave Accounting

Free software that automatically analyzes profitability

Notion

Flexible database to divide profit by product and period

Excel with ready formulas

You can generate monthly reports and link them to inventory tables

Eighth: The difference between “profit margin” and “net profit”

Term

Definition

Gross profit margin

(Selling price - product cost) ÷ selling price

Net profit

(All revenues - all costs)

Operating profit

Profit after deducting operational costs only

Ninth: How do offers and discounts deceive you?

Common scenario:

• The product costs 100 riyals

• You put a 30% discount on it → sell it for 70 riyals

• The original cost is 50 riyals

• Net profit: 20 riyals

But you didn't count:

• An advertisement to bring a customer for 10 riyals

• Packaging costs 5 riyals

• Delivery for 7 riyals

The result? You are selling at a loss even though the numbers say you are making a profit!

Tenth: How do you convince your team to differentiate between real and imaginary profit?

• Share them with simple reports

• Link incentives to profit margin, not just the number of sales

• Train them to understand the cost behind each product

• Put up a board showing the “best profitable products”

Conclusion

Success in business does not only mean selling a lot, but also making smart and thoughtful profits.

Real profit is what keeps your store alive and enables you to develop and grow. As for imaginary profit, it is like a mirage - it dazzles you on the surface, but leaves you empty-handed at the end of the month.

Start now by reviewing your numbers. Add up all expenses. And be honest with yourself. No business will succeed without financial awareness, and the first step to that is understanding the difference between real and imaginary profit.

Related reading

• The difference between accounting profit and cash flows

• How do you explain the difference between net profit and gross profit to your employees?

• The difference between gross and net profit margin – which one should you follow?

• Case study: How did a store's profits increase by 40% with one video?

• The difference between seasonal sales and ongoing sales – how do you manage it?

• The difference between operational management and strategic management of the store