BusCalcTools

Net Profit Calculator — Full Profit Waterfall from Revenue to Net

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See exactly how revenue becomes bottom-line profit after COGS, operating expenses, interest, and tax.

Net profit is revenue minus all costs: Revenue − COGS − Operating Expenses − Interest − Tax = Net Profit. The full waterfall produces gross profit, operating profit (EBIT), earnings before tax (EBT), and finally net profit. Net margin = Net Profit ÷ Revenue × 100; 10–20% is healthy for most small businesses.

How it works

The calculator walks down the income statement: start with revenue, deduct COGS to get gross profit, deduct operating expenses for operating profit (EBIT), deduct interest for earnings before tax (EBT), then deduct tax. What remains is net profit. The waterfall on the right shows each step.

Common mistakes

  • Leaving the owner's salary out of OpEx — sole owners who draw dividends or distributions often skip a salary line entirely, which inflates net profit by their entire labour cost. Always include a market-rate salary for the founder in operating expenses; otherwise the business looks more profitable than it is and every comparison to peers is distorted.
  • Confusing net profit with cash in the bank — net profit is an accounting result that recognises revenue when invoiced (not when paid) and includes non-cash items like depreciation. A profitable business can run out of cash, and a loss-making one can be cash-rich. Pair this calculator with the Cash Flow Calculator before making spending decisions.
  • Applying tax to a loss — when EBT is negative there is no tax payable in any of the three regions, and the loss can usually be carried forward against future profits. Owners sometimes still book a "tax provision" out of habit, which double-counts the loss. This calculator correctly applies tax only on positive earnings before tax.

When to use this calculator

Use this when you want a full income-statement walk from revenue to bottom line, including interest and tax. It is the right tool at year-end, when modelling the impact of a new debt facility, or when explaining to a co-owner where the profit actually ends up.

If you only need the percentage margins (gross, operating, net) without the dollar waterfall, the Profit Margin Calculator is faster. To assess whether a specific investment generates an acceptable return on capital, use the ROI Calculator instead.

See the formula
Gross Profit         = Revenue − COGS
Operating Profit     = Gross Profit − Operating Expenses
EBT                  = Operating Profit − Interest Expense
Tax                  = EBT × Tax Rate / 100   (only on positive EBT)
Net Profit           = EBT − Tax
Net Profit Margin    = Net Profit / Revenue × 100

Worked example

A US bootstrapped SaaS closes the year at $1.2M annual recurring revenue. Direct cost of revenue (hosting, third-party APIs, customer support salaries) comes to $180,000. Operating expenses (engineering and product salaries, marketing, office, software, accountancy) total $720,000. The business took a $400,000 term loan in year two and pays $40,000 of annual interest on it. Federal corporate tax sits at 21%.

Walking the waterfall: gross profit is $1.2M − $180k = $1.02M, an 85% gross margin (typical for a software business). Operating profit is $1.02M − $720k = $300,000, a 25% operating margin. Pre-tax profit after the $40k of interest is $260,000. Federal tax on that is $54,600. Net profit lands at $205,400 — a 17.1% net margin.

A 17% net margin is solid for a bootstrapped SaaS; VC-backed companies usually run lower (they re-invest gross profit into growth) while mature private-equity-style SaaS targets 25–35%. The biggest lever in this waterfall is operating expenses: a 10% OpEx reduction ($72k saved) flows almost entirely through to net profit and pushes net margin to roughly 22%. Cost discipline at the OpEx layer is usually a bigger profit lever than top-line revenue growth.

Frequently Asked Questions

What is net profit?
Net profit is the amount of money a business has left after paying ALL its expenses — including cost of goods sold, operating costs, interest on loans, and tax. It is the true bottom-line measure of business profitability, also called the "bottom line".
What is the difference between gross profit and net profit?
Gross profit = Revenue minus Cost of Goods Sold only. Net profit = Revenue minus ALL costs including COGS, operating expenses, interest, and tax. A business with a high gross profit margin can still have a low or negative net profit if overhead costs are high.
How do I calculate net profit margin?
Net Profit Margin (%) = (Net Profit / Revenue) × 100. If your net profit is $25,000 on revenue of $200,000, your net profit margin is 12.5%. This means you keep $12.50 for every $100 of revenue after paying all costs.
What is EBITDA and is it the same as net profit?
EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation) is not the same as net profit. EBITDA excludes these four items to give a measure of operational profitability. Net profit includes them all. Investors often use EBITDA for business valuation; net profit for assessing true returns.
What is a good net profit margin?
It varies significantly by industry. Retail: 2–5%. Software/SaaS: 20–30%. Consulting: 15–25%. Manufacturing: 5–10%. A net margin above 10% is generally considered healthy. Below 5% is thin and vulnerable to cost increases or revenue decline.
How does corporation tax differ between the US, UK, and South Africa?
US federal corporate tax is 21%, but state taxes add 0–10% on top (Texas and Florida charge 0%, California adds 8.84%). UK corporation tax is 25%, with a 19% small profits rate for taxable profits under £50,000. South Africa charges a flat 27% on company income. This calculator preloads the headline rate for each region, but always confirm your effective rate with an accountant.
What is the most common net profit calculation mistake?
Forgetting to deduct the owner's salary from operating expenses. A sole owner who pays themselves through dividends or drawings often shows an inflated net profit because their labour cost is missing from the income statement. Always include a market-rate salary for the founder in OpEx — otherwise the business looks more profitable than it is and decisions get made on the wrong number.
What happens if my interest expense is bigger than operating profit?
Earnings before tax (EBT) becomes negative — operating profit minus interest = a loss. The calculator stops applying tax at that point (you do not pay tax on a loss in any of the three regions, and you may be able to carry the loss forward). A negative EBT is a strong signal that your debt service is unsustainable: either revenue must grow or the loan needs to be restructured.
How is net profit different from cash flow?
Net profit is an accounting result — it includes non-cash items like depreciation and counts revenue when it is invoiced, not when it is paid. Cash flow tracks actual money in and out of the bank. A business can be profitable on paper but cash-poor (clients pay late) or unprofitable but cash-rich (deposits taken in advance). Use this calculator for profitability and the Cash Flow Calculator for liquidity.
I have my net profit number — what do I do with it?
Three things. First, calculate the net margin (net profit ÷ revenue) and compare it to your industry benchmark. Second, look at the waterfall to see which line is eating the most profit — is it COGS, OpEx, interest, or tax? Attack the biggest leak. Third, decide what to do with the profit: reinvest in growth, pay down debt, build a cash reserve, or take it as owner compensation. Treat the number as a starting point for a decision, not the end of the analysis.

Glossary

COGS
Cost of goods sold — the direct costs of producing what you sell. Materials, direct labour, freight in. Excludes overhead and admin.
EBIT
Earnings before interest and tax — gross profit minus operating expenses. The headline operating-profit number.
EBT
Earnings before tax — operating profit after deducting interest expense. The base figure for calculating corporate tax.
Net Profit Margin
Net profit divided by revenue. The percentage of every dollar of sales that becomes profit after all costs and tax.

Related calculators

Profit Margin Calculator

Calculate gross and net profit margin instantly.

Open →

Methodology & sources

Rates last verified: May 2026

Read the full methodology →

Tax rate pre-fills at headline corporate rates (US 21%, UK 25%, SA 27%). Override for: US state tax additions, UK small profits rate (19% under £50k), SA turnover tax (small business alternative).

Primary sources

Rates are reviewed annually or when a region changes its headline rate. If you spot one that's out of date, email [email protected].

For information only. This calculator does not constitute financial, accounting, or tax advice. Consult a qualified professional before making business decisions.

Try these scenarios

Pre-filled examples — click any chip to load the inputs and result.

How to calculate true net profit

  1. Enter total revenueTop-line revenue for the period — typically annual.
  2. Add COGS and operating expensesCost of goods sold first; then operating expenses like rent, salaries, marketing.
  3. Add interest expenseTotal interest paid on any business loans or credit lines in the period.
  4. Confirm the tax ratePre-filled by region. Override if you have a different effective rate.
  5. Read the full waterfallGross profit → operating profit (EBIT) → EBT → net profit, with net margin as a percentage.

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Written by

James Blanckenberg

Founder, BusCalcTools

Founder of BusCalcTools and FinnCalc. Builds practical financial calculators for small business owners and freelancers across the US, UK, and South Africa.

Editorial review by: James Blanckenberg, Founder & Editor

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