What this calculator does
Profit tells you whether a sale actually made money. This calculator separates the direct cost of what you sold from other expenses, so you can see both gross profit and the profit that reaches your bottom line.
Enter the amount you charged, what the goods or services cost you, and any additional direct expenses. The result updates as you type, using decimal arithmetic rather than floating-point maths.
How the calculation works
Gross profit subtracts only the cost of goods or services from revenue. It shows how much a sale contributes before you account for delivery, payment processing or other direct costs.
Net profit subtracts all of the costs you enter. Profit margin then expresses net profit as a percentage of revenue, so a 100 profit on 1,000 of sales (10%) is comparable with a 100 profit on 500 of sales (20%).
Worked example: A design project
- 1Revenue: 1,000.00
- 2Cost of goods or services: 600.00 (subcontracted development)
- 3Additional expenses: 100.00 (stock photography and payment fees)
Total cost is 700.00, gross profit is 400.00, net profit is 300.00 and the profit margin is 30%.
Common mistakes
- Leaving out payment processing fees or delivery costs, which makes a marginal sale look profitable.
- Treating revenue as profit. Revenue is what customers paid; profit is what remains after costs.
- Mixing costs from different periods, such as counting this month's revenue against last month's stock purchase.
- Comparing margins between businesses without checking whether one includes owner salaries and the other does not.