How to define, calculate, and actually keep more of what you earn
The word profit gets thrown around a lot in the world of small business. But ask five business owners what it means, and you’ll probably get five different answers.
Does profit mean leftover cash in your bank account?
Does it mean what’s left after paying yourself?
Is it the same as your salary?
Not quite. Understanding what “profit” actually means — and how to track it — is one of the most important steps in running a sustainable, successful business.
Let’s break it down in plain language.
Profit vs Revenue
First, let’s clear up the most common confusion.
Revenue is your top-line income — all the money your business brings in from sales or services.
Profit is what’s left after you subtract your expenses. It shows how much your business actually earns after operating costs are paid.
If your business makes $150,000 in revenue but you spend $120,000 to run it, your profit is $30,000. That’s your bottom line — and that's also what you'll be paying tax on.
The Different Types of Profit
In small business, there are two key types of profit you should understand:
Gross Profit
This is your revenue minus the direct costs of delivering your product or service — things like materials, packaging, or labor directly tied to fulfillment. It tells you how efficient your business is at producing what it sells.
Net Profit (also known as Net Income)
This is what’s left after all business expenses are paid — including rent, software, marketing, taxes, and your own salary. It’s the clearest indicator of your business’s overall financial health.
Inside The Small Business Planner, we help you track both — so you know exactly where your money’s going and what’s left for savings, investments, or growth.
Is Owner Pay the Same as Profit?
No — and this is a critical distinction.
Owner Pay is your paycheck. It’s the money you pay yourself for running the business and is considered a business expense.
Profit is what’s left after you’ve paid yourself.
Too many business owners treat their pay as profit — or vice versa — which leads to inconsistent income, tax confusion, and financial instability.
In The Small Business Planner, we help you separate these clearly using the Core 4 bank account system: one for income, one for business expenses, one for owner pay, and one for taxes.
Why Profit Matters
Profit is more than just a number — it’s what funds your business’s future.
Your profit is what gives you the ability to:
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Save for slow seasons
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Invest in growth
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Hire help
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Pay off debt
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Create real wealth
Without profit, your business may survive — but it won’t thrive. It’ll always feel like you’re working harder than your bank account shows.
How to Know If You’re Profitable
You’re profitable when:
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Your income covers your expenses
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You’re paying yourself consistently
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You’re saving money every month (even a little)
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You’re not relying on credit to fund your operations
The Small Business Planner includes plug-and-play tools that walk you through this math — and help you make changes if your profit margins are too thin or unpredictable.
Final Takeaway
Profit is not a bonus. It’s not “whatever’s left.” It’s a sign of a healthy, well-structured business.
When you define profit clearly, track it consistently, and build your systems around it, your business becomes more resilient, more rewarding, and more sustainable.
If you want help structuring your money so you can actually see and keep more of your profit, The Small Business Planner is your roadmap.
Explore The Small Business Planner now → https://smallbusinessplanner.com/products/planner