How to Calculate Profit in a Small Business (2026): Formula and Kenyan Examples

Nov 10, 2026

Buy More Mall Kenya

Sales are not profit. A shop can sell KSh 300,000 a month and still lose money once stock, rent, transport and wages are paid. Calculating profit properly tells you whether your prices are right and which products are worth keeping.

Quick answer: Gross profit = sales − cost of goods sold (what you paid for the items you sold). Net profit = gross profit − operating expenses (rent, wages, transport, data, permits, packaging). Profit margin = net profit ÷ sales × 100. Calculate it monthly from your records. On Buy More Mall, My Business in your Buy More Mall seller dashboard: customers, stock levels and low-stock alerts on every package, plus buying prices, stock history, expenses, profit and daily cash from the Simba package up.

The Profit Formulas

Measure	Formula	Tells you
Gross profit	Sales − cost of goods sold	How much your products earn before running costs
Gross margin	Gross profit ÷ sales × 100	Whether your markup is healthy
Net profit	Gross profit − operating expenses	What the business really earned
Net margin	Net profit ÷ sales × 100	How much of each shilling you keep

Worked Example: A Small Boutique (One Month)

Item	KSh
Sales	180,000
Cost of the clothes that were sold	105,000
Gross profit	75,000
Rent	20,000
Shop assistant	15,000
Transport to buy stock	6,000
Packaging bags	2,000
Data, adverts and online shop	5,000
Electricity and county permit (monthly share)	3,000
Net profit	24,000
Net margin	24,000 ÷ 180,000 = 13.3%

Illustrative figures only.

Costs People Forget

Transport to buy stock (it belongs in the cost of the goods).
Damaged, expired or stolen items.
Your own salary: pay yourself, or your "profit" is really your wage.
Annual costs (permits, renewals) spread over 12 months.
Mobile money and bank charges.
Discounts and free delivery.

Profit and Loss Statement Format

A monthly profit and loss (P&L) statement lists: Sales → minus cost of goods sold → gross profit → minus each expense → net profit. Keep one per month and compare: is profit growing?

See Profit Automatically With My Business

Add buying prices for your products in My Business (Simba and above).
Record expenses as you pay them.
Open the Profit view: sales from paid orders and invoice payments, minus cost of goods (using your saved buying prices) and expenses.
Check daily cash to see what came in today.

How to Increase Profit

Review prices: price for profit, not just to match others.
Push items with the best margin.
Cut slow stock that ties up cash (stock management).
Charge for delivery.
Sell more to existing customers.

Common Mistakes to Avoid

Treating all money received as profit.
Ignoring your own time and salary.
Comparing months without the same costs included.
Not counting stock losses.

Frequently Asked Questions

How do I calculate profit in business?

Net profit = sales − cost of goods sold − operating expenses.

What is the difference between gross and net profit?

Gross profit is before running costs; net profit is after all expenses.

What is a good profit margin for a small business in Kenya?

It varies by sector; track your own margin monthly and aim to improve it.

How do I calculate profit per item?

Selling price − buying price − costs to get it to the customer (transport, packaging).

Can I see my profit on Buy More Mall?

Yes, from the Simba package, in My Business, once buying prices and expenses are entered.

Cover photo: Calculator and Money by 401(K) 2013, BY-SA 2.0, via Openverse. Cropped.

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