All businesses are built on a simple profit model. Revenues (money made from sales of services and goods) minus Fixed and Variable costs = Profits.
Revenues come from the sales of products and/or services and the receipt of this money is critical in the cash flow of any business. Incoming cashflow from loans helps cashflow, but is not included in Revenues when you calculate your profit. We'll
Fixed costs consist of items such as rent, insurance, mortgage and equipment lease; if you have salaried employees, these costs would also be fixed. These costs stay constant month to month so are easy to budget for.
Variable costs include items such as utilities, office supplies, automobile expenses, hourly labor, materials used in producing your products, and miscellaneous expenses. These costs can vary each month depending on the work load of the business and, in the case of items like utilities, the season of the year.