Turnover is vanity, profit is sanity

Back in May 2012 I opened the doors of Rockalily Cuts, my hair salon in Hoxton, East London. I had zero customers that day. 

The next day I took £114, however the trick of course when running a business is focusing on profit, not just turnover (takings). It would be easy to take £1000, selling £5 notes for 20 pence coins. You'd have a turnover of £1000, which for a moment would feel brilliant. You'd have loads of happy clients too, raving about how good your shop was. They'd possibly tell their friends and leave great online reviews. Your shop may even have a queue outside, leaving you feeling like you're running a successful business.

But you'll of course be running at a loss. You'll have sold 5,000 five pound notes, and you'll be left with £1000, leaving you with a loss of £24,000. An extreme example of course, but to clearly illustrate that anyone can sell anything at the right price. It's much harder to sell it and make enough profit on it to keep selling it.

This is where the oft-cited phrase on Dragons' Den, "Turnover is vanity, profit is sanity" comes in. There is very little point selling something if you're making no profit, or even a loss on it.