How do I calculate net profit for my small business?

February 20, 2024
3
minutes to read
by
Michael Nuciforo
Contents

Net profit is a measure of a small business's profitability, and it is calculated by subtracting expenses from revenues. In other words, net profit is the amount of money a business has earned after accounting for all its expenses.

To calculate net profit, you will need to first determine your small business's total revenue. This is the amount of money the company has earned from the sale of its products or services.

Next, you will need to determine your small business's total expenses. This includes all of the costs associated with running the business, such as the cost of goods sold, labor costs, rent, utilities, and other expenses.

Once you have determined the total revenue and expenses, you can calculate the net profit by subtracting the total expenses from the total revenue. For example, if a company has total revenue of $100,000 and total expenses of $70,000, the net profit would be $30,000 ($100,000 - $70,000 = $30,000).

It's important to note that net profit is just one measure of a company's financial performance, and it should be considered along with other financial metrics to get a complete picture of your small business's financial health.

A good time to calculate your net profit is at the end of your fiscal year, or accounting period. This will allow you to see how much money your business has made over the course of the year, and how much you have spent. This information can be useful for a number of purposes, such as preparing your taxes, creating a budget for the next fiscal year, or making strategic business decisions.

It’s important to note, not all small business's make a net profit, and net profit - if achieved - can vary greatly depending on several factors, such as the type of business, its size, and its industry.

Some businesses may be more profitable than others, and some may make a net profit every year, while others may only make a profit some of the time.

In general, making a net profit is an important goal for most small businesses, as it indicates that the business is generating more revenue than it is spending on expenses. However, there are also many other factors that can affect a business's success, and making a net profit is not the only measure of a business's success.

You can easily use Thriday to calculate your net profit automatically, reducing time wasted by you on small business admin. Just create an account with Thriday today, and take advantage of a free trial, to access Thriday’s automated financial reports.

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