Definition
Net profit is what's left after subtracting all costs — both direct job costs (COGS) and operating expenses (overhead) — from total revenue. It's the true "bottom line." Net profit is what the business actually earned and what can be reinvested, distributed to owners, or retained. Taxes are paid on net profit (or a variant of it depending on entity type).
Why It Matters
Net profit answers the ultimate question: did the business make money? A contractor can have strong gross margins and still lose money if overhead is too high. Conversely, tight gross margins with lean overhead can produce decent net profit. Tracking net profit monthly — not just at year-end — allows course corrections before small problems become big ones.
Field Example
Continuing from a gross profit example: Gross Profit $50,000, Operating Expenses (office rent $2k, insurance $3k, vehicle $1.5k, software $500, marketing $1k, owner salary $15k) = $23,000. Net Profit = $50,000 − $23,000 = $27,000. Net margin = $27,000 ÷ $200,000 = 13.5%.
Calculation / Formula (if applicable)
Net Profit = Gross Profit − Operating Expenses
Net Margin % = (Net Profit ÷ Revenue) × 100
Operating Expenses = All non-COGS business costs (rent, insurance, admin, owner pay, software, etc.)
Software Application
Show net profit prominently on the dashboard alongside gross profit. Highlight negative net profit in red. Show net margin % so the user understands profitability relative to revenue size, not just in dollar terms.
Tooltip Version
Net profit is what's left after all costs — job costs AND overhead. It's the true bottom line and what the business actually earned.
Related Objects
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