Building, Growing and Running Artisan Business Part 7
Understanding Business Numbers
Many artisans are skilled at their craft but struggle with the numbers side of their business. Yet understanding your business numbers is the difference between working hard and working smart. In this guide, we break down the essential financial concepts every artisan needs to know—revenue, profit, margins, expenses, taxes, and cash flow.
Revenue — The Money Coming In
Revenue is the total money coming into your business from your work.
It is not profit. It is the money before expenses.
Revenue is important, but it is not the full picture.
Let me tell you about Femi.
Femi is a tailor. His revenue is high—he makes millions of naira worth of clothes every month.
But his expenses are also high. He has to buy materials constantly. He has staff salaries, rent, utilities, and taxes.
His profit is low. Despite the high revenue, he barely makes a profit.
Profit — The Money Left Over
Profit is what remains after you subtract all your costs from revenue.
Profit is the bottom line.
Without profit, your business cannot survive.
Let me tell you about Nneka.
Nneka is a hairdresser. Her revenue is modest—she makes about ₦500,000 per month.
But her expenses are low. She has one staff. Her rent is affordable. She manages her products carefully.
Her profit is high—about ₦200,000 per month.
Nneka's business is healthier than Femi's despite having lower revenue.
Gross Margin — The Efficiency Check
Gross margin is revenue minus the direct cost of delivering your service.
It shows how efficiently you work.
Gross Margin =
(Revenue — Cost of Materials) ÷ Revenue × 100Let me tell you about two tailors.
Makes a dress for ₦50,000. The materials cost ₦20,000.
Gross margin = 60%
Makes a dress for ₦50,000. The materials cost ₦35,000.
Gross margin = 30%
Tayo has a healthier business model. Every job leaves more money to cover other expenses and generate profit.
Net Margin — The Overall Profitability
Net margin is revenue minus all expenses (including materials, rent, salaries, utilities, taxes).
It shows your overall profitability.
Net Margin =
(Revenue — All Expenses) ÷ Revenue × 100A high net margin means you're keeping more of every naira you earn. A low net margin means you're working hard but not keeping much. Track your net margin over time to see if your business is getting healthier or weaker.
Expenses — Where Your Money Goes
Expenses are everything you spend to run your business.
Track every expense. Know where your money is going.
Categories of expenses:
- Fixed expenses — rent, salaries (stay the same each month)
- Variable expenses — materials, utilities, communication, data, transportation (change based on activity)
- One-time expenses — equipment (large purchases that don't happen often)
Many artisans don't track their expenses properly. They know roughly what they earn but have no idea what they spend. This is a recipe for business failure. Start tracking every expense today—even the small ones.
Taxes — The Non-Negotiable
Taxes are non-negotiable.
Key tax obligations for Nigerian businesses:
- Register for a Tax Identification Number (TIN) with the FIRS
- File annual returns within 42 days of your incorporation anniversary
- Understand your CIT obligations based on your turnover
- Comply with VAT requirements if applicable
Businesses with annual turnover below ₦50 million enjoy a 0% Companies Income Tax rate.
Understand your tax obligations. Comply with them. Don't let tax problems destroy your business.
Cash Flow — The Difference Between Profit and Survival
Cash flow is the movement of money in and out of your business.
- Positive cash flow means more money is coming in than going out.
- Negative cash flow means more money is going out than coming in.
Cash flow is not profit.
You can be profitable on paper and still go bankrupt because you don't have cash.
Let me tell you about Uche.
Uche is a carpenter. He has ₦5 million in outstanding invoices. He has contracts worth ₦10 million. On paper, he is profitable.
But his cash flow is terrible. Customers delay payments. He has to pay his workers and suppliers before he gets paid.
He runs out of cash. He can't pay his workers. They leave. His reputation is damaged. The business collapses—even though he was "profitable" on paper.
Putting It All Together: Financial Intelligence
Understanding your business numbers is not optional—it's essential. The stories of Femi, Nneka, Tayo, Sylvanus, and Uche all point to one truth: being good at your craft is not enough. You must also be good with your numbers.
To build a financially healthy business, remember to:
- Track revenue — know exactly how much money is coming in
- Monitor profit — revenue minus all expenses
- Calculate gross margin — to check your efficiency
- Track net margin — your overall profitability
- Know your expenses — fixed, variable, and one-time
- Comply with taxes — understand and meet your obligations
- Manage cash flow — because profit on paper doesn't pay the bills
🚀 The Bottom Line
Numbers tell the story of your business. They reveal what's working, what's not, and where you need to improve. Ignoring your numbers is like driving with your eyes closed.
Start tracking your numbers today. Know your revenue, profit, margins, expenses, and cash flow. Let the numbers guide your decisions.
Your business's financial health is in your hands. Take control of it today.