Revenue can lie

In 2026, it’s completely possible to “grow” and still feel broke.

Because revenue is a volume signal. Profit is a health signal.

If revenue is up but profit is down, something is quietly draining the business. Often it’s not one big disaster. It’s seven small leaks that compound.

This article is built to do two things:

1. Help you spot the leaks that most owners miss
2. Give you fixes that don’t require you to “just work harder”

First: confirm it’s a leak, not a timing issue

Before you panic, check this: Did your profit drop because you:

• stocked up heavily this month (inventory cash out)
• paid annual tools/insurance/taxes
• had a one-time expense (repairs, equipment)
• ran a big promo campaign
• had delayed customer payments

If yes, part of the “profit down” might be timing. If no, keep going. You likely have true leakage.

The 7 Hidden Profit Leaks and how to fix them

Leak #1: You’re selling more of the wrong thing

This is the most common leak in 2026 because marketing platforms push volume.

What happens:

• your best-selling item is not your best-profit item
• your promo item becomes the main item
• a low-margin service becomes your default offer
• you spend more time on work that pays less
  

How to spot it

Ask:

• What are my top 5 revenue products/services?
• What are my top 5 profit products/services?
  If those lists don’t match, you have a leak.

Fix without changing your whole business

• make the high-margin item the “default recommendation”
• bundle low-margin items with high-margin ones
• raise price on your “most annoying” offering first
• create a “minimum order” or “minimum scope” rule

Your marketing can be working perfectly and still be feeding the wrong mix.

Leak #2: Discounts are eating margin more than you realize

Many businesses now use constant promos because customers expect deals.

But discounting is rarely “just 10% off.” It also increases:

• support demands
• returns
• delivery volume
• rush orders

How to spot it: If your discount rate is rising but your workload is rising too, profit will fall.

Fix

Use smart discounting:

• switch from % off → bundles (protects margin)
• use “gift with purchase” for higher basket size
• set a margin floor: “we don’t go below X% gross margin”
• stop discounting your best sellers (discount slow movers instead)

Rule: If discounts don’t increase profit, they’re not a strategy—they’re a habit.

Leak #3: Cost creep (subscriptions, tools, and “small expenses”) quietly exploded

In 2026, businesses carry more software than ever—sometimes without realizing it.

How to spot it

If you can’t list your monthly subscriptions off the top of your head, you have leakage.

Fix: the 30-minute “expense reset”

• export last 60 days of expenses
• highlight anything recurring
• cancel or downgrade anything not used weekly
• consolidate tools (one tool doing 3 jobs beats 3 tools doing one job each)

 Tool creep is the new rent creep.

Leak #4: Delivery and fulfillment costs have become your silent profit killer

Even service businesses have “fulfillment” (time, travel, tools, labor).

In product businesses it’s:

• packaging
• courier cost changes
• failed deliveries
• returns processing
• breakage

How to spot it

Revenue grows → shipping costs rise faster → profit shrinks.

Fix

• build shipping into pricing (don’t pretend it’s separate)
• set minimum order thresholds
• simplify packaging (cheaper + faster)
• audit failed deliveries and fix the top 2 causes
• renegotiate with courier or add a second courier option

A business can be “growing” while fulfillment becomes a loss center.

Leak #5: Labor and time leakage (you’re paying for activity, not output)

This shows up as:

• overtime
• constant fixIng
• “busy days” with little progress
• extra hires without more delivery

How to spot it: If the team is working harder but output isn’t rising, you have workflow leakage.

Fix

Use a simple metric:

• profit per labor hour (rough is fine)
  Then:
• standardize the top 3 repeat tasks
• reduce rework by improving “definition of done”
• stop “custom work” that isn’t priced for custom effort
• shift low-skill tasks away from high-skill people
  In 2026, the smartest businesses don’t cut labor first. They cut rework first.

Leak #6: Returns, refunds, and quality issues are higher than you admit

Returns don’t just cost you a refund. They cost:

• shipping both ways
• handling time
• damaged reputation
• replacement product
• support time

How to spot it: If returns/refunds are rising as revenue rises, profit will fall.

Fix

• identify your top 2 return reasons and redesign them
• improve product descriptions (reduce expectation mismatch)
• create a “prevention step” (photo confirmation, sizing guide, clear terms)
• tighten quality control on the stage where defects are introduced

Returns are not a customer problem. They’re an operations signal.

Leak #7: Cash flow timing is choking you even if you’re profitable on paper

You can be “profitable” but still struggle if:

• customers pay late
• you pay suppliers upfront
• inventory sits too long
• you scale faster than cash cycles can support

How to spot it: If you’re always waiting on money while paying out constantly, timing is your leak.

Fix

• require deposits or partial upfront payment
• shorten invoice terms
• offer small incentives for early payment
• negotiate better supplier terms
• reduce SKU complexity so inventory moves faster
  

Fast-growing businesses fail from cash timing, not lack of demand.

The 15-Minute Profit Leak Audit

1) Pull last month’s numbers

• total revenue
• gross profit (revenue – direct costs)
• operating profit (after overhead)

2) Answer these 7 questions (yes/no)

1. Are my best sellers also my best profit drivers?
2. Did discounting increase profit or just sales volume?
3. Have subscriptions/recurring expenses increased in 6 months?
4. Did fulfillment/delivery costs rise faster than revenue?
5. Did labor hours rise faster than output?
6. Are returns/refunds rising?
7. Are payments coming in slower than cash going out?

3) Pick ONE leak to fix this week

Not seven. One.

The “fix order” (what to tackle first)

This is the sequence that gives the fastest results for most businesses:

1. Product/service mix (sell more of what makes profit)
2. Discount discipline (stop margin bleeding)
3. Fulfillment costs (delivery + packaging + failures)
4. Tool creep (quick savings)
5. Rework (time becomes profit)
6. Returns (quality and expectation fixes)
7. Cash timing (make growth fundable)

In Closing

Revenue going up with profit going down isn’t a mystery.  It’s a message. It usually means your business is growing faster than your profit engine. Fix the leaks, and you don’t just make more money, you make growth feel lighter.