If you want to have a profitable business then the questions you need to answer are the following, in this order:
Do I have customers who will pay for my product or service?
Can I sell my product or service for more money than it costs me?
Does the money I have left over cover my expenses?
Question 1 is about the volume and value of business you can get from your customers. If you're selling a tangible product then it's the number of products you can sell each day/week/month/year and the price you get for them. For a service, it's how many customers you have and what they will pay you. You can experiment with the price (up/down, BOGOF, limited offers, offer extension, freemium), compare yourself with the competition and use different sales channels. But until you find the point where customers buy, you don't have a business.
Note: Don't think that lowering price always increases volume; it can do the opposite!
Question 2 is about the gross profit you're making, which is the difference between the price of the product/service and its direct cost. For a profitable business you'll first need to make a positive gross profit. If you're selling your product for £25 and it costs you £15, then you are making £10 gross profit, which is a gross margin of £10/£25 = 40%. If it's the other way round then you're losing money and can either raise the price, lower the cost or forget it.
Note: Your service may not have any direct costs, so your gross profit might be almost your price.
Question 3 is about your net profit. This is the total gross profit you're making, taking into account the volume you're selling, minus your discretionary (or indirect) expenses. These will be salaries, workspace, marketing, equipment costs (or their depreciation), travel and so on. Stuff that isn't a direct cost to create your product. Service businesses might have higher level of indirect expenses, like marketing.
It's a progression; first 1, then 2, then 3. Prove you can sell what you've got, then prove you can make money on each of the things you're selling, then prove that you can cover all your costs.
What's left is pure profit - and time to pay yourself a dividend. Clever clogs!
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