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How to calculate the net profit of your store in an easy way?
- Aug 17
- 4 min read
Updated: Aug 27
Introduction
Do you end each month not knowing exactly how much you've made? Do you feel like your store is selling well, but you don't see that profit in your bank account? You're not alone.
Many small business owners and stores suffer from Lack of clarity on net profit They confuse income and expenses, and real profit and circulating money.
In this article, we will explain:
What actually is net profit?
The difference between revenue and profit
The easy equation to calculate net profit
Types of costs that need to be calculated
And practical examples
Finally: a simple schedule that you can use monthly
First: What is net profit?
Net profit It is the amount you have left after deduction all Costs and expenses out of total revenue.
Second: The difference between basic terms
Term
Definition
Revenue
Total sales (without deducting any expenses)
gross profit
Revenue – cost of goods sold only
Net profit
Gross profit – all administrative and operating expenses
Quick illustration:
Suppose you have a coffee shop:
Monthly revenue = 50,000 riyals
The cost of purchasing coffee, milk, and cups = 20,000 riyals
Rent, electricity, employees, and advertisements = 15,000 riyals
permission:
Gross profit = 50,000 - 20,000 = 30,000 riyals
Net profit = 30,000 - 15,000 = 15,000 riyals
Third: The basic equation for calculating net profit
CopyEdit
Net profit = total revenues - (cost of goods + operating expenses + administrative + marketing + others)
Fourth: Types of costs that should be paid attention to
🧾 1. Costs of goods or raw materials (COGS)
These are the direct costs of the products you sell:
Restaurant: Cost of meat, vegetables, spices
Coffee shop: coffee, milk, cups
Online store: The cost of products from the supplier
🧾 2. Operational costs
Include:
Employee salaries
Shop rent
Electricity and water
maintenance
Internet
Cleaning tools
🧾 3. Marketing costs
Instagram and Facebook ads
Content design
Print brochures or menus
Product photography
🧾 4. Administrative expenses
accountant
Accounting or point of sale programs
Government fees (for example, renewing a registration or license)
🧾 5. Variable costs
Electronic payment commissions
Delivery application fees
Seasonal expenses (decor, offers)
Fifth: How do you calculate net profit step by step?
✅ Step 1: Collect revenue
Collect all the amounts entered from sales during the month:
Cash sales
Sales via points of sale
App sales
Bank transfers
✅ Step 2: Calculate the cost of products sold
For each product or item, calculate the cost of preparing or purchasing it, then sum it up.
✅ Step 3: Calculate the remaining expenses
Add up all operational, administrative and marketing costs during the same period.
✅ Step 4: Apply the equation
CopyEdit
Net profit = revenue – (cost of goods + remaining expenses)
Sixth: A detailed practical example
Suppose you have a juice shop, and your monthly data is as follows:
item
Amount
Sales revenue
40,000 riyals
Cost of fruits, ice and cups
13,000 riyals
Employee salaries
8,000 riyals
rent
5,000 riyals
Electricity and water
1,000 riyals
Advertisements on Instagram
1,500 riyals
Cleaning and maintenance materials
500 riyals
Net profit = 40,000 - (13,000 + 8,000 + 5,000 + 1,000 + 1,500 + 500) = 40,000 - 29,000 = 11,000 riyals
Seventh: A simple schedule that you can use monthly
item
Value
Total revenue
...............
- Cost of goods
...............
= Gross profit
...............
- Employee salaries
...............
- Rent
...............
- Electricity and water bills
...............
- Marketing
...............
- Other expenses
...............
✅ Final net profit
...............
Eighth: Practical tips to improve the clarity of net profit
💡 Use a simple accounting program
Even if you don't like Excel, you can use an application like:
Loyverse-
Square POS-
QuickBooks-
-A period
-Or even Google Sheets
💡 Separate personal and business expenses
Do not confuse:
Gasoline for your car
Family dinner
House purchases
And the store expenses!
💡 Don't just look at sales
Selling a lot does not mean making a lot of profit.
Focus on Profit margin — Your sales may be 50,000 riyals, but your profit is only 3,000.
💡 Review the numbers monthly
Set aside a day at the end of each month to review:
Revenue
Expenses
Changes
Net profit
💡 Reduce smart costs
See suppliers
Compare raw materials prices
Stop unnecessary subscriptions
Follow offers and discounts
Ninth: Common mistakes that should be avoided
Error
Impact
Confusing sales with profit
Incorrect pricing decision
Forget about some costs such as delivery or commissions
Misleading numbers
Not recording small expenses
Accumulation of hidden losses
Rely on estimates rather than numbers
Weakness in decision making
Ignore the monthly analysis
Difficulty detecting problems
Tenth: When do you use net profit in your decisions?
To determine whether you are actually "winning" or just covering costs
To know your ability to expand or open another branch
To make a decision to increase prices or reduce expenses
To determine the partner or employee ratio based on profit
To apply for financing or a loan
Conclusion
Net profit is Your project's true mirror You may be fooled by the big sales numbers, however Net profit is what remains after all the bills are gone.
Learn to calculate and understand it clearly, monitor it monthly, and you will start making better, smarter decisions for your project.
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