Gross Profit Formula

The gross profit formula is used to calculate the revenue generated by a business after expenses.
How do I calculate gross profit?

First, determine how much money is coming into your business through sales of your products and services. Next, figure out how much you’re spending to generate those sales. That number should include production and maintenance costs, salaries, software costs, advertising expenses, rent… Whatever you’re paying for to run your business. Then, subtract the money coming out from the money coming in, and you’ve found your gross profit.

The gross profit formula

Total Revenue - Total Expenses = Gross Profit

Why is it important to understand gross profit?

The goal of any business is to make as much money as possible. To do that, profits need to be your core focus. By discovering gross profit, you create an opportunity to optimize your marketing, sales, and fulfilment. Find the things that make you the most money and double down on them. Find the things that are losing you money and cut them out.


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