Starting a Business (Years 7–10) — Financial Literacy

How to turn an idea into income by understanding revenue, costs, profit and break-even.

You notice everyone at school wants slime, so you start making and selling it. Suddenly you are not just spending money — you are running a tiny business. Every founder, from a market-stall trader to the person behind your favourite app, started with the same simple question: will this make more money than it costs?

Why this matters — whether you sell slime, tutor a younger pupil, or one day launch an online shop, the same four ideas decide whether you make or lose money: revenue, costs, profit and break-even. Learn them once and you can size up any business idea in minutes.

Revenue, costs and profit

Revenue is all the money coming in from sales — every pot of slime someone hands you cash for. Costs are all the money going out to make and sell the thing — ingredients, packaging, a stall fee. Profit is what is left over once costs are taken away: profit = revenue − costs. If your costs end up bigger than your revenue, you have made a loss instead, and that is a warning to change your price, cut your costs, or rethink the idea.

Revenue minus costs leaves profit. Here £100 − £60 = £40.

Fixed and variable costs

Fixed costs stay the same no matter how much you sell — a market-stall pitch fee, a website subscription. You pay them even if you sell nothing.
Variable costs rise with each item you make — the glue and glitter for each pot of slime. Sell twice as much and these roughly double.

Cost	Type
Stall pitch fee for the day	Fixed
Ingredients per item	Variable
Website subscription	Fixed
Packaging per order	Variable

Break-even and pricing

Break-even is the point where revenue exactly covers costs — no profit yet, but no loss either. Sell one more after that and you are finally in profit. To find it, ask a simple question: how many items must I sell so that my revenue equals my total costs? A handy shortcut is to divide your fixed costs by the profit you make on each item. Pricing matters just as much: charge too little and you never cover your costs, but charge too much and nobody buys. Good pricing covers your costs, beats your competitors where you can, and still leaves a fair profit for your effort and your risk. Risk is real — a business can always fail, customers may not turn up, and you may lose the money and time you put in. That is exactly why the reward, when it comes, belongs to the person brave and careful enough to try.

Where the rising revenue line meets total costs is break-even; beyond it you make a profit.

Worked reasoning: Your stall costs £20 for the day (fixed). Each smoothie costs £1 to make (variable) and sells for £3, so each one earns £2 towards the £20. To break even you need £20 ÷ £2 = 10 smoothies. The 11th smoothie is your first £2 of profit.

Common mistake: counting only the money that comes in and forgetting costs. Selling £100 of slime sounds great, but if it cost you £110 to make, you made a £10 loss.

Memory hook: Revenue minus Costs = Profit — "Really Clever Profit". If the answer is negative, it is a loss.