Business concepts, explained simply.

Profit

What's left after you pay for everything.

Profit = Revenue − Cost

Revenue

All the money coming in from sales.

Revenue = Price × Volume

Gross margin

How much of each sale you keep after the direct cost of making it.

Gross margin % = (Revenue − COGS) ÷ Revenue

Contribution margin

What each extra unit adds towards covering fixed costs.

Contribution margin = Price − Variable cost per unit

Customer acquisition cost (CAC)

How much you spend to win one new customer.

CAC = Sales & marketing spend ÷ New customers

Lifetime value (LTV)

The total profit a customer brings before they leave.

LTV ≈ (ARPU × Gross margin %) ÷ Monthly churn

LTV : CAC ratio

Is a customer worth more than it cost to get them?

LTV ÷ CAC

Churn

The share of customers who leave in a period.

Churn % = Customers lost ÷ Customers at start of period

ARPU

Average revenue per user.

ARPU = Revenue ÷ Number of users

Break-even point

How much you must sell before you stop losing money.

Break-even units = Fixed costs ÷ Contribution margin per unit

Payback period

How long until an investment earns back what it cost.

Payback = Upfront investment ÷ Annual cash return

Return on investment (ROI)

How much you gained for every rupee you invested.

ROI = (Gain − Cost) ÷ Cost

Net present value (NPV)

Future cash, translated into today's money.

NPV = Σ Cash flowₜ ÷ (1 + r)ᵗ − Initial investment

Conversion rate

The share of people who take the next step.

Conversion % = People who converted ÷ People who could have

Market share

Your slice of the total market.

Market share = Your sales ÷ Total market sales

Retention & cohorts

Track groups who joined at the same time to see who sticks around.

Retention (month n) = Active users from cohort in month n ÷ Cohort size

Profitability framework

The go-to structure for ‘profits are down — why?’

Market entry framework

Should we enter this new market — and how?

Porter's Five Forces

Why some industries are more profitable than others.

The 3Cs

Company, Customers, Competitors — a quick strategy lens.

The 4Ps (marketing mix)

Product, Price, Place, Promotion.

SWOT

Strengths, Weaknesses, Opportunities, Threats.

Pricing strategy

Three ways to set a price: cost, competitors, or value.

Growth strategy (Ansoff matrix)

Four ways to grow: sell more, sell new, go new places, or both.

M&A framework

Should we buy this company?

Value chain

Every step from raw material to happy customer.

Operations framework

Fixing a process: capacity, speed, quality, cost.

EBITDA

Operating profit before interest, taxes, depreciation and amortisation.

EBITDA = Revenue − Operating costs (excluding D&A)

COGS (cost of goods sold)

The direct cost of making what you sold.

Gross profit = Revenue − COGS

Fixed vs variable costs

Costs that stay put vs costs that grow with sales.

Economies of scale

Getting cheaper per unit as you get bigger.

TAM, SAM, SOM

Total market, the part you can serve, the part you can realistically win.

Unit economics

Does the business make money on one order, one customer, one ride?

Unit profit = Revenue per unit − Variable cost per unit

Synergies

Extra value created by combining two companies.

Working capital

The cash tied up in running the business day to day.

Working capital = Current assets − Current liabilities

Operating leverage

When small changes in sales cause big changes in profit.

Cannibalisation

When your new product steals sales from your old one.

Net gain = New product sales − Sales lost from existing products

MECE

Mutually exclusive, collectively exhaustive — no overlaps, no gaps.

Issue tree

Break one big question into smaller ones you can answer.

Hypothesis-driven thinking

Start with a guess, then test it.

Market sizing (guesstimates)

Estimate a big number from small, sensible assumptions.

Driver tree

A maths version of an issue tree.

Funnel analysis

Find the stage where customers drop off.

The 80/20 rule (Pareto)

A small share of causes drives most of the result.

Sensitivity analysis

What happens to the answer if an assumption is wrong?

Benchmarking

Compare with others to see what ‘good’ looks like.

Answer first (pyramid principle)

Lead with the recommendation, then the reasons.