Net Profit is what’s left over after all expenses are paid. It’s the bottom line—the most important number in your business’s financial health. It tells you how much actual profit you made, not just what you sold.
Net Profit Formula
Net Profit = Total Revenue − Total Expenses(Includes COGS, operating expenses, interest, taxes, depreciation, etc.)
Example
Let’s say your business had:
- Total Revenue: $500,000
- COGS: $200,000
- Operating Expenses: $150,000
- Other Expenses (e.g. taxes, interest): $25,000
Net Profit = $500,000 − ($200,000 + $150,000 + $25,000) = $125,000
Why It Matters
- It’s the number that truly reflects success
- It’s used to calculate taxes
- It attracts investors or buyers
- It helps you set realistic goals and strategies
Low Net Profit?
High revenue but low or negative net profit means something’s off—either costs are too high, margins are too low, or both.
Tip: Net Profit isn’t the only goal—but it is what keeps your business alive. Use it to assess what’s really working, and trim the rest.