How do you calculate net profit?

Net profit is calculated by subtracting all expenses from total revenue. The formula is: Net Profit = Revenue − COGS − Operating Expenses − Interest − Taxes. For example, if a business earns $200,000 in revenue and has $140,000 in total costs, its net profit is $60,000. As a percentage, Net Profit Margin = (Net Profit ÷ Revenue) × 100 = 30%.

What is the difference between net profit and gross profit?

Gross profit only subtracts the direct cost of goods sold (COGS) from revenue. Net profit subtracts every expense — COGS, operating costs, rent, salaries, marketing, depreciation, interest on debt, and income taxes. Net profit is the true 'bottom line' figure that shows what the business actually earned and kept after paying everyone and everything.

What is a good net profit margin?

A good net profit margin depends on the industry. Software companies often see 15–30%+. Professional services typically run 10–25%. Retail businesses average 2–6%. Restaurants often fall between 3–9%. Manufacturing is typically 5–15%. Any positive net margin means the business is profitable. Compare your margin to industry peers and track whether it is growing over time.

What is EBITDA and how does it relate to net profit?

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortisation. It measures operating profitability before financing costs and non-cash charges. EBITDA is often higher than net profit because it adds back interest, tax, depreciation, and amortisation. Investors use EBITDA to compare companies across different capital structures and tax situations, while net profit shows actual earnings after all real obligations are paid.

Can a business have high revenue but low or negative net profit?

Yes. A business can generate millions in revenue and still report a net loss if its expenses exceed its income. This happens when operating costs are too high, debt interest is large, or the business is investing heavily in growth. High-growth tech startups often run at a net loss intentionally for years. Monitoring net profit alongside gross margin and cash flow gives a complete picture of financial health.

Net Profit Calculator – Calculate Net Income, Net Profit Margin % & Full Income Statement Breakdown

Net Profit Calculator

Enter your revenue and every cost category to instantly see net profit, net profit margin %, gross profit, EBITDA, and a full income statement waterfall — free net income calculator for any business.

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Enter Your Financials

Total Revenue ($)

All income before any deductions

Cost of Goods Sold — COGS ($)

Direct cost to produce or deliver what you sold

Operating Expenses ($)

Rent, salaries, marketing, admin, utilities

Tax Rate (%)

Business income tax rate

Time Period

Currency Symbol

Depreciation & Amortisation ($)

Non-cash charge — used to calculate EBITDA

Interest Expense ($)

Loan interest and financing costs

Other Income ($)

Investment income, grants, one-off gains

Units Sold

Optional — calculates net profit per unit

Industry Type

Your Profit Breakdown

Fill in your revenue and expense figures on the left and click Calculate Net Profit to see your complete P&L breakdown.

Net Profit (Bottom Line)

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per month

Income Statement

Revenue —

Cost of Goods Sold —

Gross Profit —

Gross Margin —

Operating Expenses —

Depreciation & Amortisation —

EBITDA —

Operating Profit (EBIT) —

Interest Expense —

Other Income —

Pre-Tax Profit (EBT) —

Tax Expense —

Net Profit —

Net Profit Margin —

Net Profit per Unit —

vs Industry Benchmark —

Revenue Breakdown

Revenue vs Costs vs Profit

How Net Profit Works

Net profit is the money left over after a business pays every single expense — the cost to make or buy what it sells, staff wages, rent, marketing, loan interest, and income taxes. It is the true "bottom line" on any income statement.

You can have strong revenue and still have a weak or negative net profit if your costs are too high. That is why tracking net profit — not just revenue — is the only real measure of whether a business is financially healthy.

Net profit margin converts the dollar figure into a percentage of revenue, making it easy to compare your performance with competitors or industry benchmarks regardless of your business size.

Net Profit Formula

The complete income statement flows from top to bottom:

Gross Profit = Revenue − COGS
EBIT = Gross Profit − Operating Expenses
EBITDA = EBIT + Depreciation & Amortisation
EBT = EBIT − Interest + Other Income
Net Profit = EBT − Tax
Net Margin % = (Net Profit ÷ Revenue) × 100

Example: Revenue $200,000 · COGS $80,000 · OpEx $60,000 · Tax 21% → Net Profit = $47,400 · Net Margin = 23.7%.

Net Profit Margin Benchmarks by Industry

Industry	Typical Net Margin	Key Cost Driver
Software / SaaS	15% – 30%+	R&D, sales & marketing
Professional Services	10% – 25%	Staff wages
Healthcare	5% – 15%	Supplies & clinical labour
Manufacturing	5% – 15%	Raw materials, production
Restaurant / Food	3% – 9%	Food cost & labour
E-commerce	2% – 8%	Fulfilment & returns
Retail — General	2% – 6%	Inventory & overhead
Construction	2% – 6%	Labour & materials
Grocery	1% – 3%	Inventory & spoilage

Benchmarks are industry averages. Individual businesses vary widely based on size, location, and operational efficiency.

Net Profit vs Gross Profit vs EBITDA

These three profit measures each tell a different part of the story — none is better than the others; they answer different questions.

Gross Profit shows how efficiently a business produces or sources what it sells. High gross profit means strong pricing power or good supplier terms. It says nothing about overhead.
EBITDA strips out financing costs and non-cash charges so investors can compare operating performance across companies with different debt levels or asset bases. A high EBITDA with a low net profit often means heavy debt or depreciation.
Net Profit is what actually remains after every real obligation is met. It is the only number that tells you if the business truly made money. You can pay dividends from net profit; you cannot pay dividends from EBITDA.
Use all three together: gross profit diagnoses production efficiency, EBITDA gives a clean operating comparison, and net profit shows real-world viability.

Frequently Asked Questions

Start with your total revenue and subtract every cost in order: first COGS to get gross profit, then operating expenses to get EBIT, then interest to get pre-tax profit (EBT), then multiply EBT by your tax rate to get the tax bill, and finally subtract that tax to get net profit. Example: $200,000 revenue − $80,000 COGS = $120,000 gross profit − $60,000 OpEx = $60,000 EBIT − $3,000 interest = $57,000 EBT × (1 − 0.21) = $45,030 net profit.

Operating expenses are all the regular costs of running the business that are not directly tied to producing what you sell. They typically include rent or lease payments, employee wages and benefits (excluding direct production workers), marketing and advertising spend, utilities, insurance, office supplies, software subscriptions, and general administrative costs. They do not include COGS, interest on debt, or income taxes — those are separate line items in the income statement.

For small businesses, a net profit margin above 10% is generally considered healthy. However, what counts as "good" varies a lot by industry. A restaurant at 5% margin may be performing excellently for its sector, while a software business at 5% would be considered weak. The most important thing is to compare your margin against businesses in the same industry, track it over time, and aim for steady improvement each period.

Gross profit only subtracts the direct production cost. If your operating expenses — rent, salaries, marketing — are very high relative to your gross profit, those costs will wipe it out. Add heavy loan interest or a large tax bill on top, and the net result can easily become a loss. This is common in early-stage businesses that are scaling quickly: revenue and gross profit grow, but operating costs temporarily outpace them until the business reaches a certain volume.

There are four levers: raise prices, reduce COGS, cut operating expenses, or grow revenue faster than costs. Raising prices has the fastest impact if your market allows it — a 5% price increase on $500,000 revenue adds $25,000 straight to the bottom line. Cutting COGS requires better supplier deals or product redesign. Reducing OpEx means reviewing every fixed cost and renegotiating or eliminating what does not produce return. Growing revenue via volume keeps margins intact only if you do not add proportional costs.

No. Net profit is an accounting figure based on when revenue is earned and expenses are incurred (accrual accounting). Cash flow tracks actual money moving in and out of the bank. A business can show a healthy net profit on paper but still run out of cash if customers are slow to pay (high accounts receivable) or if the business made large capital investments. This is why fast-growing businesses often have strong net profit but tight cash. Always track both numbers.

Net Profit by Revenue at Common Total Expense Ratios

How much net profit remains at different revenue levels when total costs represent various shares of revenue (before tax).

Revenue ($)	Total Costs 50%NP Margin 50%	Total Costs 65%NP Margin 35%	Total Costs 75%NP Margin 25%	Total Costs 85%NP Margin 15%	Total Costs 92%NP Margin 8%	Total Costs 97%NP Margin 3%

Net Profit = Revenue × Net Margin %. Currency shown as $. Figures are pre-tax illustrations.

Revenue Needed to Hit a Target Net Profit

How much revenue you need to generate a specific net profit at common net margin percentages.

Target Net Profit ($)	At 5% Margin	At 10% Margin	At 15% Margin	At 20% Margin	At 30% Margin

Required Revenue = Target Net Profit ÷ Net Margin. Use this to set revenue targets when you know your cost structure.

Net Profit After Tax at Common Business Tax Rates

How much of your pre-tax profit survives different corporate tax rates.

Pre-Tax Profit ($)	Tax 10%	Tax 15%	Tax 20%	Tax 21%	Tax 25%	Tax 30%	Tax 35%

Net Profit After Tax = Pre-Tax Profit × (1 − Tax Rate). Common corporate rates: US Federal 21%, UK 25%, Canada 15% federal, Australia 30%, Germany ~30%.

Net Profit Margin Benchmarks by Industry & Business Type

Reference ranges to compare your net margin against sector peers.

Industry	Low	Average	High	Main Profit Leak	Key Metric to Watch
Software / SaaS	5%	18%	35%+	R&D & sales costs	Customer Acquisition Cost
Professional Services	5%	15%	28%	Labour cost	Billable utilisation rate
Healthcare / Medical	3%	10%	20%	Admin & compliance	Revenue per patient
Manufacturing	2%	8%	18%	Materials & production	Cost per unit
Retail — Apparel	3%	7%	15%	Inventory & rent	Sell-through rate
Retail — Electronics	1%	4%	10%	Price competition	Gross margin per SKU
E-commerce	1%	5%	12%	Fulfilment & returns	Return rate
Restaurant / Food	1%	5%	12%	Food cost & labour	Revenue per seat
Construction	1%	4%	10%	Labour & subcontractors	Bid-to-close ratio
Grocery / Supermarket	0.5%	2%	5%	Spoilage & competition	Inventory turnover
Digital Products	20%	40%	70%	Platform fees	Monthly recurring revenue
Finance / Insurance	10%	20%	35%	Claims & defaults	Loss ratio

Sources: NYU Damodaran, IBISWorld sector reports. Ranges are indicative. Company size, geography, and efficiency affect actual margins significantly.

Net Profit Sensitivity — Impact of Changing Operating Expenses

How a 10% change in operating expenses affects net profit at different revenue and OpEx levels.

Revenue ($)	OpEx ($)	Base Net Profit	−10% OpExNet Profit	+10% OpExNet Profit	Impact of 10% Change

Assumes COGS = 40% of revenue and no interest or tax for simplicity. A 10% cut in OpEx can have a disproportionately large impact on net profit.

Annual Net Profit Projection at Different Net Margins

Estimated annual net profit based on monthly revenue and common net margin percentages.

Monthly Revenue ($)	Annual Revenue	At 3% NP	At 7% NP	At 12% NP	At 18% NP	At 25% NP

Annual Net Profit = Monthly Revenue × 12 × Net Margin %. Use this table to estimate how much your business could earn at full-year scale.