Enter the gross margin (%), total revenue, and the total fixed cost into the calculator to determine the target profit.

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## Target Profit Formula

The following formula is used to calculate a target profit.

TP = R*GM – FC

- Where TP is the target profit ($)
- R is the total revenue ($)
- GM is the gross margin
- FC is the fixed cost ($)

## Target Profit Definition

A target profit is defined as the profit that a company wishes to achieve through a total revenue, gross margin, and fixed cost.

## Target Profit Example

How to calculate target profit?

**First, determine the gross margin.**Determine the average margin the business earns as a percentage of the cost to revenue.

**Next, determine the total revenue.**Calculate the total revenue generated by the business.

**Next, determine the total fixed costs.**Calculate the total fixed costs for the business or segment.

**Finally, calculate the target profit.**Using the formula calculate the target profit.

## FAQ

**What is a target profit?**

A target profit is a specific total amount of profit a company or business wishes to achieve based on a fixed cost, revenue, and margin. Changing a target profit requires a change in one of those three metrics, meaning that to increase target profit you need to increase margin, increase revenue, or decrease costs.