Profit is the financial gain a business makes after subtracting all relevant costs from its revenue. It is a blanket term for different way of subtracting costs from revenue.
Why Profit Matters
Profit is the most fundamental measure of whether a business model is working. It helps teams understand:
- How much value the business actually keeps after costs
- Whether pricing, cost, and demand are in balance
- How sustainable growth is over time
- How much can be reinvested into product, marketing, or innovation
- How resilient the business is to market or cost pressures
Profit isn’t just a financial outcome, it’s a reflection of the entire commercial system.
How Profit Works
Profit can be calculated at different levels:
- Gross profit: revenue minus COGS
- Operating profit: gross profit minus operating expenses
- Net profit: operating profit minus all remaining costs (tax, interest, etc.)
Profit = Revenue – Total Costs
Example: If a business generates £500,000 in revenue and incurs £420,000 in total costs, profit is £80,000.
Common Use Cases
- Financial reporting: understanding business performance
- Pricing strategy: ensuring prices protect profitability
- Cost management: identifying where efficiency is needed
- Investment decisions: determining what the business can fund
- Channel strategy: comparing profitability across wholesale and DTC
- Forecasting: modelling future scenarios
Related Terms
- Profit Margin
- Gross Profit
- Net Profit
- COGS
- Operating Expenses
- Revenue
What Profit Really Tells Us
Profit is often treated as the final number the outcome at the bottom of the page. But it’s more revealing than that. Profit shows whether the business is creating value in a way that customers recognise and are willing to pay for. It reflects the strength of the product, the clarity of the pricing, and the efficiency of the operations behind it.
Rising profit can signal momentum: a product mix that resonates, a brand that’s strengthening, or a cost structure that’s becoming more disciplined. Falling profit can signal strain: rising costs, heavier discounting, or a shift in customer behaviour that the business hasn’t yet adapted to.
What makes profit especially meaningful is how it captures the quality of decisions. Two businesses can generate the same revenue, but the one with stronger profit is usually the one making clearer, more intentional choices about what to make, how to price, and where to invest.
At its core, profit is a measure of coherence. It shows whether the story the business tells is matched by the economics behind it. When teams read profit not just as a number but as a narrative, they gain a clearer sense of where the business is thriving, where it’s stretched, and where the next smart move lies.
