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

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 ($)

To calculate the target profit, multiply the revenue by the gross margin, then subtract the fixed costs.

Target Profit Definition

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

Target Profit Example

How to calculate target profit?

  1. First, determine the gross margin.

    Determine the average margin the business earns as a percentage of the cost to revenue.

  2. Next, determine the total revenue.

    Calculate the total revenue generated by the business.

  3. Next, determine the total fixed costs.

    Calculate the total fixed costs for the business or segment.

  4. Finally, calculate the target profit.

    Using the formula calculate the target profit.


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.

target profit calculator
target profit formula