How to calculate your real business profit (not just what you sell)

The most common confusion: sales ≠ profit

A business can sell $10,000 a month and only earn $800. Another can sell $3,000 and earn $1,200.

Why? Because real profit (net profit) isn't what you sell: it's what's left after paying for what you sold.

The basic formula is:

Profit = Sale price − Product cost

But applying it product by product, by hand, is tedious. And most business owners don't do it regularly.

The trick is recording the cost of each product

When you add a product in TIENDAONLINE, there are two price fields:

• •Sale price: what the customer pays
• •Cost: what it cost you (purchase price from supplier, ingredient cost, etc.)

With those two values, the system automatically calculates:

• •Margin % = (Price − Cost) ÷ Price × 100
• •Profit per unit = Price − Cost

Why this changes decisions

Example 1 — The product that looks like a star

You run a bakery. Your bestseller is loaf bread: you sell 200 loaves a day at $15 each. $3,000 a day in sales of that one product.

But each loaf costs $11 in ingredients. Your margin is 27%.

You also sell 40 sweet rolls at $20. The rolls cost $6 in ingredients. Your margin is 70%.

In sales, the loaf bread "wins." In real profit, the sweet rolls are far more profitable.

Example 2 — The product that's costing you money

If you record a product cost and the margin comes out negative or below 5%, that product is bleeding you. Maybe you have it as a "customer service" line (don't sell at a loss without knowing it) or maybe you need to adjust the price.

How to see profit in TIENDAONLINE

In the Inventory module, enable the profitability view. You'll see each product with:

• •Sale price
• •Recorded cost
• •Margin % (green if healthy, yellow if low, red if worrying)

In the Reports module:

• •Total sales for the period (gross revenue)
• •Cost of goods sold (what it cost you to sell what you sold)
• •Real net profit = the difference between them

This is the number that matters. Not how much you sold, but how much you kept.

The 5 most common profit calculation mistakes

1. Not recording the cost of each product: without cost, you only see sales, not profit.

2. Forgetting variable ingredient costs: if you make something with multiple ingredients, add them all up.

3. Not updating cost when your supplier raises prices: if your supplier raised prices and you didn't adjust, your margin shrank quietly.

4. Ignoring low-rotation products: they take up space, have storage cost, and if they don't rotate, they're losses.

5. Confusing cash in the till with profit: what comes into the till includes credit payments, deposits and other things that aren't period profit.

The weekly report you should see

Every Monday, before you open, spend 5 minutes reviewing:

1. How much did I sell last week?

2. What was my cost of goods sold?

3. What was my net profit?

4. What were my top 5 best-selling products?

5. Which have the highest margins?

With that info you can decide: do I raise a price? Drop a product that doesn't sell? Run a promo on the highest-margin items?

Conclusion

The difference between a business that survives and one that grows is that the growing one knows exactly how much it earns on each product and makes decisions based on that.

Start today by recording your product costs and activate the reports to see your real profit.

See profitability reports in TIENDAONLINE →