Net profit is the number that tells you whether your business is actually making money. This free calculator takes your revenue and every cost you enter, then works out your net profit and net profit margin as you type - no sign-up, no spreadsheet.
How to calculate net profit
Net profit is your total revenue minus every cost of running the business. The formula is simple:
To turn that into a percentage - your net profit margin - divide net profit by revenue and multiply by 100:
The steps in plain terms:
- Add up your costs - cost of goods sold, operating expenses, and any tax or interest.
- Take that total off your revenue - what is left is your net profit.
- Divide by revenue and times by 100 - that gives you the margin as a percentage.
Net profit margin explained
Your net profit margin is simply your net profit shown as a percentage of your revenue. Where net profit is a pound figure, the margin - sometimes called your net profit percentage - tells you how many pence of every pound of sales you actually keep once all costs are paid. That makes it easy to compare one month against another, or your business against others your size, no matter how big the sales are.
To work out net profit margin, you divide net profit by total revenue and multiply by 100. So a business with £30,000 net profit on £99,000 revenue has a 30% net profit margin - it keeps 30p of every £1 it takes. The net profit margin calculator above does this for you the moment you type your figures in, so you can see the percentage change as costs go up or down.
Net profit vs gross profit
People mix these two up all the time, but they measure different things.
Gross profit is revenue minus only the cost of goods sold - the direct cost of making or buying what you sell. It tells you how much you make on the product itself, before the cost of running the business.
Net profit goes all the way to the bottom line. It takes off everything else too: rent, wages, marketing, software, tax and interest. Net profit is always lower than gross profit, and it is the real measure of what your business keeps at the end of the day.
Worked example
Say a small shop turns over £99,000 in a year. Its stock and materials (COGS) cost £40,000, and its running costs - rent, wages, bills and marketing - come to £30,000. Here is how the net profit falls out:
| Total revenue | £99,000.00 |
| Less: cost of goods sold | − £40,000.00 |
| Less: operating expenses | − £30,000.00 |
| Net profit | £30,000.00 |
The net profit is £30,000, and the net profit margin is £30,000 ÷ £99,000 × 100 = 30.0%. In other words, the business keeps 30p of every £1 it takes.
Frequently asked questions
What is net profit?
Net profit is what your business keeps after every cost is taken off your total revenue. That includes the cost of goods sold, operating expenses like rent and wages, and any other costs such as tax and interest. It is the bottom-line figure that shows whether the business actually made money.
How do I calculate net profit?
Add up all your costs: cost of goods sold, operating expenses and any other costs like tax and interest. Then subtract that total from your total revenue. The formula is: Net profit = Total revenue − COGS − Operating expenses − Other costs.
What is the difference between gross profit and net profit?
Gross profit is revenue minus only the cost of goods sold. Net profit goes further and takes off all the other costs of running the business too - rent, wages, marketing, tax and interest. Net profit is always lower than gross profit and is the truer measure of what you keep.
What is a good net profit margin?
It depends heavily on your industry. As a rough guide, a net profit margin around 10 percent is often seen as average, 20 percent or more is strong, and under 5 percent is tight. Service businesses tend to run higher margins than retail or hospitality, so compare against businesses like yours rather than a single benchmark.
Can net profit be negative?
Yes. If your total costs are higher than your revenue, your net profit is negative - this is a net loss. It is common in the early months of a business or during a slow period. The calculator shows a loss clearly so you can see exactly how much you are down.
Should I include tax in net profit?
It depends what you want to measure. Net profit before tax leaves tax out, while net profit after tax includes it. This calculator lets you add tax and interest in the optional "other costs" box, so you can work out either figure depending on what you enter.
How do you work out net profit margin?
To work out net profit margin, divide your net profit by your total revenue and multiply by 100. For example, £20,000 net profit on £80,000 revenue gives a net profit percentage of 25%. Enter your figures in the net profit margin calculator above and it works the percentage out for you as you type.
Is this net profit calculator suitable for UK businesses?
Yes. It is a free net profit calculator UK business owners can use straight away - all figures are shown in pounds with British formatting, and it works for sole traders, limited companies and any small business. Just enter your revenue and costs to see your net profit and margin.
