{"id":25384,"date":"2026-06-08T09:26:10","date_gmt":"2026-06-08T09:26:10","guid":{"rendered":"https:\/\/thebusinessculture.co.uk\/hey\/?post_type=know-how&p=25384"},"modified":"2026-06-08T10:05:53","modified_gmt":"2026-06-08T10:05:53","slug":"gross-profit-vs-net-profit-what-every-business-owner-needs-to-know","status":"publish","type":"know-how","link":"https:\/\/thebusinessculture.co.uk\/hey\/know-how\/gross-profit-vs-net-profit-what-every-business-owner-needs-to-know\/","title":{"rendered":"Gross Profit vs Net Profit: What Every Business Owner Needs to Know"},"content":{"rendered":"
\n

Gross Profit vs Net Profit: What Every Business Owner Needs to Know<\/h1>\n

A lot of business owners feel a bit silly asking this question, but it's something you should feel completely comfortable asking your bookkeeper or accountant:<\/p>\n

What's the difference between gross profit and net profit?<\/span><\/p>\n

Let's start at the beginning.<\/p>\n

Turnover<\/p>\n

Turnover is simply the money you receive from your customers.<\/span><\/h2>\n

From this, you take away your cost of sales – the direct costs involved in delivering your product or service.<\/p>\n

What's left is your gross profit<\/span> (sometimes called your gross margin).<\/p>\n

Gross Profit<\/h2>\n

Gross profit shows how efficiently your business is producing or delivering what it sells.
It helps you understand whether your pricing is covering direct costs.<\/p>\n

However, it doesn't take into account everything it costs to run your business day to day.
That's where overheads<\/span> come in.<\/p>\n

Overheads<\/h2>\n

Overheads are the ongoing costs of running your business. These may include:<\/p>\n

- Rent
- Insurance
- Software subscriptions
- Marketing
- Telephone and internet costs
- Wages and salaries
- Professional fees<\/p>\n

Overheads are often split into two categories:<\/p>\n

Fixed costs<\/span> – costs that stay broadly the same each month, such as rent or insurance.<\/p>\n

Variable costs<\/span> – costs that fluctuate depending on activity, such as utilities, commissions or materials.<\/p>\n

Net Profit<\/h2>\n

Once you've deducted all of those costs, you're left with your net profit<\/span>.<\/p>\n

This is your bottom-line figure and one of the most important indicators of how your business is performing.<\/p>\n

Why This Matters<\/h2>\n

You can be busy making sales and bringing money through the door, but still not be profitable if costs are quietly increasing or being overlooked.<\/p>\n

For example, if suppliers increase prices and you don't review your own pricing, your margins can shrink without you noticing.<\/p>\n

<\/p>\n

Questions Worth Asking<\/h2>\n

- Have I reviewed my supplier costs recently?
- Do my prices still provide a healthy gross margin?
- Could I negotiate better rates?
- Could I switch suppliers?
- Is there any waste or unnecessary spending I could reduce?<\/p>\n

To Sum It Up<\/h2>\n

More sales doesn't always mean more profit.<\/p>\n

You can be working flat out, fully booked and still not be as profitable as you think if costs are increasing or margins are being squeezed.<\/p>\n

Understanding the difference between gross profit<\/span> and net profit<\/span> helps you make better business decisions, price correctly and keep your business financially healthy.<\/p>\n

If you'd like help understanding your numbers or support keeping on top of your bookkeeping, get in touch with Books in Order.<\/p>\n

Call or WhatsApp 07784 290949 or email hello@booksinorderhull.co.uk<\/p>\n

We look forward to hearing from you!<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"

Gross Profit vs Net Profit: What Every Business Owner Needs to Know A lot of business owners feel a bit silly asking this question, but it's something you should feel completely","protected":false},"author":12313481,"featured_media":25386,"template":"","know_how_category":[],"class_list":["post-25384","know-how","type-know-how","status-publish","has-post-thumbnail","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/thebusinessculture.co.uk\/hey\/wp-json\/wp\/v2\/know-how\/25384","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thebusinessculture.co.uk\/hey\/wp-json\/wp\/v2\/know-how"}],"about":[{"href":"https:\/\/thebusinessculture.co.uk\/hey\/wp-json\/wp\/v2\/types\/know-how"}],"author":[{"embeddable":true,"href":"https:\/\/thebusinessculture.co.uk\/hey\/wp-json\/wp\/v2\/users\/12313481"}],"version-history":[{"count":4,"href":"https:\/\/thebusinessculture.co.uk\/hey\/wp-json\/wp\/v2\/know-how\/25384\/revisions"}],"predecessor-version":[{"id":25389,"href":"https:\/\/thebusinessculture.co.uk\/hey\/wp-json\/wp\/v2\/know-how\/25384\/revisions\/25389"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/thebusinessculture.co.uk\/hey\/wp-json\/wp\/v2\/media\/25386"}],"wp:attachment":[{"href":"https:\/\/thebusinessculture.co.uk\/hey\/wp-json\/wp\/v2\/media?parent=25384"}],"wp:term":[{"taxonomy":"know_how_category","embeddable":true,"href":"https:\/\/thebusinessculture.co.uk\/hey\/wp-json\/wp\/v2\/know_how_category?post=25384"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}