What is Net Profit?

What is Net Profit and How is it Calculated?

Net Profit is a key financial metric that shows how much money a business has left after covering all its costs—both variable and fixed. It’s a true indicator of a brand’s profitability and long-term financial health.

Net Profit Formula

Net Profit = Contribution Profit – Fixed Cost

• Contribution Profit is what's left after variable costs are subtracted from revenue.

• Fixed Costs are consistent expenses, such as rent, salaries, and software subscriptions, that remain unchanged with changes in sales volume.

Why Net Profit Matters

Net Profit provides a clear snapshot of whether your business is financially sustainable and scalable. It helps you assess if your revenue growth is truly translating into actual earnings.

How to Improve Net Profit

1. Optimize Expenses
   Review and reduce overhead where possible. Are there subscriptions, tools, or operations that can be trimmed or renegotiated?

2. Make Strategic Decisions
   Track net profit trends over time to guide smarter decisions on investments, hiring, and scaling. Prioritise actions that deliver long-term value.

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