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For many middle school students the world of business can feel distant, a topic that one would be more exposed to in high school, however, we think about it more frequently than one would imagine - whether it’s saving allowance, pricing for their side hustle or thinking about pursuing business related degrees in the future, three key business concepts surfaces: Profit, Cost, and Revenue; Supply and Demand; Company Structures. Every successful entrepreneur understands all three, as they equip you with fundamentals that help you make smart decisions and build wealth. Let’s break down these three concepts so you can gain a head start, think like a business owner, and enter high school or university, staying ahead of your peers.
Why should middle schoolers learn business concepts?
You might be thinking, why do I need to know all this in middle school? The simple answer is that money touches nearly every part of our lives, from the moment you decide how to spend your allowance to the day you retire; yet most people never receive formal education about business. Learning these concepts is essential for survival. Here’s also how these fundamentals will help build real financial literacy:
- You learn the difference between revenue and profit so you would know if your business venture is covering the cost (break-even) or actually making money.
- Building a habit of tracking money going in and out, so you will always be aware of your financial position.
- Grasp the understanding of why price changes are affected by a product and services scarcity or abundance, allowing you to start spotting good deals and also help you spot market trends, enabling you to capitalize on popular items.
- Learn how different ways businesses are organised, so you understand who makes decisions and who takes risks when problems arise.
- Prepare for your future to gauge and understand what it means to work for yourself, with partners, running a franchise or leading a global enterprise.
Profit / Cost / Revenue
Now that we’ve discussed why business literacy is important for preparing for one's financial future, let’s delve into one of the most important fundamentals of business: understanding profit, cost, and revenue.
What is Revenue?
Revenue is the total amount of money a business earns from selling goods, providing services, or other sources such as licensing or investment. A common misconception about revenue is that high revenue equals high profit, in fact, revenue is not profit, it is only the total money brought in by sales before any expenses are subtracted.
Examples in context
- An ice cream shop sells 100 scoops of ice cream per day at $3 each: Revenue = $300 per day.
- A bakery sells 50 cakes per week at $40 each: Revenue = $2000 per week.
- A clothing store sells 2500 shirts per month at $15 each: Revenue = $37,500 per month.
What are Costs?
Costs, also called expenses, are everything a business spends money on to run its operations. Essentially, any money going out of a business is considered a cost.
There are two main types of costs:
Examples in context
- Ice cream shop: Rent (fixed cost) + ingredients, cups, cones (variable cost).
- Clothing store: Rent, insurance, internet bills (fixed costs) + advertising, shipping (variable costs).
What is Profit?
Profit is the money you make after you subtract all costs from revenue. For a business, this is the figure that actually matters.
It can be represented through this formula: Profit = Revenue - Total Cost
There are three possible outcomes:
Examples in context
- Ice cream shop: Revenue $300 per day - Cost $100 per day = Profit $200 per day.
- Clothing store: Revenue $37,500 per month - Cost $40,000 per month = Loss $2,500 per month.
- Bakery store: Revenue $2000 per week - Cost $2000 per week = Breakeven.
Demand and Supply
Now that you have learned about profit, cost and revenue which tells you whether or not you’re making money. However, revenue is dependent entirely on what a customer is willing to pay, therefore understanding the concept of demand and supply will help you strategically set your optimal price to maximize your profit.
What is Demand?
Demand is a customer's desire, willingness, and ability to purchase a product or service at a given price. Demand can be influenced by factors such as trends, seasons, and customer preferences. The law of demand states that when price goes up, demand goes down, and when price goes down, demand goes up.
Examples in context (Ice cream shop)
- On a hot day, demand for ice cream will be higher as people may want to buy something to cool down.
- On a cold day, demand for ice cream may be lower as people may not want a frozen item.
What is Supply?
Supply is the amount of product or service a seller is able and willing to offer at a given price. Supply can fluctuate based on factors such as production costs, weather, and raw material availability. The law of supply states that when price increases, supply increases, and when price decreases, supply decreases.
Examples in context (Ice cream shop)
- On a hot day, you may run out of your best-selling flavours by lunchtime, meaning that your supply is limited.
- If the price of sugar goes up, you may be able to produce fewer ice creams as it is now more expensive to produce ice creams.
- You have a capacity of making a maximum of 200 ice creams a day with your current equipment and employees.
How does Demand and Supply work together?
Company Structure
We’ve talked about a business's financial health through Profit, Cost, and Revenue, and how to set prices influenced by market forces: Demand and Supply. However, one more critical piece ties everything together: how the business is structured. Understanding your options and how each one works helps you make the right decisions depending on your goals and vision for your company.
Sole Proprietorship
A sole proprietor, also known as a sole trader, is a person who owns and runs a business alone, without any partners. There is no legal separation between the owner and the business. This means that if the business owes money, the owner's personal property can be used to repay debts and losses.
Real-World Examples:
- Food Truck
- Local Convenience Store
- Independent Bakery Shop
- Freelance Graphic Designer
Partnership
A partnership is a business owned by two or more people or entities (upper limit cap differs by country) own, manage, operate the business together. They also share any business profits and losses amongst the parties in the partnership.
Types of partnership
- General partnerships — All partners share equal control, management duties and full liability for debts.
- Limited partnership — These partners invest money in the business, are not involved in managing it, and are not liable for business debts.
Real-World Examples:
- Law firms
- Medical clinic
- Accounting firm
- Two friends opening an ice cream shop
Private Limited Company (Pvt Ltd)
A private limited company is a business privately owned by its shareholders, and it sells shares to selected individuals or institutions, not the general public. The company is a separate legal entity from its owners.
Real-World Examples:
- Dyson (electronics & appliance)
- Mars Inc. (confectionary and other food products)
- Haribo (gummy bears)
- Decathlon (sporting goods)
Public Limited Company (PLC)
A public limited company is a business whose shares are listed on a stock exchange/market, and can be freely bought and sold by the general public. The company is a separate legal entity from its owners.
Real-World Examples:
- Apple (technology)
- Nike (athletic footwear & clothing)
- McDonald’s (fast food chain)
- Tesla (automotive)
Franchise
A franchise is a business model where one person (franchisee) purchases the right to sell goods and services using its brand name, supply chain systems, trademark, and support from the existing company (franchisor).
Real-World Examples:
- KFC (fast food chain)
- Domino’s Pizza (pizza chain)
- 7-Eleven (convenience store)
- Anytime Fitness (24 hours gym)
Crimson Rise for Middle School Business Profile Building
Understanding basic business concepts builds a foundation for academic and future success, however, learning these concepts on your own can feel overwhelming.
This is where Crimson Rise comes in to alleviate your stress through strategic business literacy development and long-term preparation:
- Assess whether business studies aligns with your strengths, interests, and long-term career aspirations, helping you make informed decisions about different majors and career paths within this field, but more importantly, whether to select business management or economics as an elective in high school.
- Build personalised business projects through Crimson’s Capstone service line, where you will get one-on-one mentorship from experienced business professionals who can guide you through every stage from idea formulation to launching your business ideas into reality.
- Provide expert one-to-one tutoring in the business and economics fields, ensuring that you are always ahead of your classroom content with a solid foundation in these areas.
Additionally, for Crimson’s middle school service line—Crimson Rise —there is a dedicated 20-hour Entrepreneurship Course that equips students with essential entrepreneurial skills and knowledge from mentors who graduated from top universities globally.
With Crimson Education, our industry-leading consultant will help you identify your strengths and weaknesses, match you with the right learning materials, and ensure you walk into high school, college and your career feeling informed and confident about each stage of your decision-making.
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