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Net Profit: Definition, examples and tips for beginners ⚖️
Net Profit definition:
Net profit is the money you actually keep after paying all your business expenses. This includes direct costs (like materials), operating costs (like rent or internet), taxes, and any other fees.
In simpler terms, it’s your total income (Gross Profit) minus all expenses. It shows how much your business truly earns, not just how much you sell. Net profit is the number that really matters because it’s the money you can take home or use to grow your business.
Net Profit Formula ∑
Net Profit = Total Income − Total Expenses
How to calculate Net Profit
Net Profit = Total Income − Total Expenses
Let’s say you're a self-employed graphic designer:
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Total Sales: You earned $5,000 this month from various design projects.
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Expenses:
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Cost of software subscriptions: $200
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Advertising and marketing: $300
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Taxes: $1,000
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Other expenses (like utilities and internet): $500
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Using the formula:
Gross Profit (Sales) = $5000
Total Costs = $200 + $300 + $1,000 + $500 = $2000
Net Profit = $5,000 − $2,000 = $3,000
So, your net profit is $3,000 for the month. This is the amount you actually take home after covering all your business costs.
Try SASA to get a simple view of your Net and Gross Profit
Simple Accounting software for self-employed people
SASA helps you keep track of your business's income, and expenses so you can know your Gross and Net profit. Just connect your bank accounts ad SASA will do the rest for you.
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Gross Profit vs Net Profit
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Gross profit is how much you make (from sales/services provided) BEFORE costs
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Net profit is what you make after all costs, insurance and taxes