What is Profit?
What's actually left after every cost is paid — the 'bottom line,' and the only line that pays you.
Profit is revenue minus every expense: materials, labor, rent, software, fees, taxes, the works. It's the 'bottom line' because it's what remains at the bottom of the income statement once reality has been applied to the top one.
There are several profits and the distinction matters. 'Gross profit' subtracts only the direct cost of what you sold. 'Operating profit' also takes out the cost of running the business — rent, salaries, software. 'Net profit' is what survives after interest and taxes, and that is the number genuinely yours. When someone says 'we're profitable,' always ask which one they mean.
A business can grow revenue every quarter and still go bankrupt, and many have. Profit is the number that decides whether you have a business or an expensive hobby with good traffic — unless you're a venture-funded startup, in which case see you at the next funding round.
Related terms
Definitions from the Business Dog Glossary — educational, occasionally satirical, never financial advice.