Desired Profit Calculator

Most businesses plan forward: costs, then sales, then whatever profit is left over. This calculator plans backwards. Start with the profit you want to keep after tax, and it solves for the exact revenue and unit sales that deliver it, in two modes that fit retailers and product businesses alike.

Quick Answer

Key takeaways. Start from the profit, not the costs: required revenue equals fixed costs plus the grossed-up profit goal, divided by the contribution margin ratio. Tax must be grossed up, not added on: a $2,000 after-tax goal at 20% tax needs $2,500 of pre-tax profit. Margin of safety is your shock absorber: 33.3% means revenue can fall by a third before profit hits zero. And small cost moves swing the target: on this example, cutting variable costs 5 points, from 40% to 35%, cuts required revenue from $12,500 to $11,538.46, a saving of about $962, while on a business with $50,000 of fixed costs the same 5-point cut saves over $11,000.

How to use the desired profit calculator

Pick the mode that matches how you think about costs, enter the worked-example values or your own, and click Calculate. Percent mode suits retailers, restaurants, and agencies whose costs scale with revenue: enter fixed costs, variable costs as a percent of sales, the after-tax profit goal, and the tax rate. Unit mode suits products, billable hours, and projects: enter the selling price and variable cost per unit instead of the percentage, and the tool returns required units as well as revenue.

Read the outputs in order. Required revenue is the headline: the sales level that leaves exactly your profit goal after tax. Break-even revenue is the survival line, where profit is zero. Margin of safety is the gap between the two as a share of required revenue, and profit margin on required revenue is your after-tax goal as a share of that revenue, 16.0% on the worked example. Switching modes clears the results, so you start each lens clean, and Reset restores the worked example.

The formula, with the tax step most people skip

The full formula, with the after-tax qualifier kept in place, is: required revenue equals (fixed costs plus desired after-tax profit divided by (1 minus tax rate)) divided by the contribution margin ratio. The contribution margin ratio is 1 minus variable costs as a share of sales. In unit mode the same idea reads: required units equals (fixed costs plus grossed-up profit) divided by (price minus variable cost per unit), rounded up to whole units.

The tax step is the whole point. Profit is what remains after tax, so the pre-tax profit must be larger than the goal: $2,000 divided by (1 minus 0.20) equals $2,500, and the $500 difference is the tax bill. Skipping that division, or adding tax somewhere else in the chain, is how a plan ends up short. The flow for the worked example runs: profit goal $2,000 after tax, grossed up to $2,500 pre-tax, plus $5,000 fixed costs equals $7,500, divided by the 60% contribution margin ratio equals $12,500. Check it backwards: $12,500 of revenue less 40% variable costs ($5,000) less $5,000 fixed costs leaves $2,500 pre-tax, less 20% tax ($500) leaves exactly $2,000.

Two honest quirks of the tool are worth knowing. In unit mode, break-even units are rounded up to whole units, so 334 units at $25 equals $8,350, slightly above the $8,333.33 break-even revenue figure, which is unrounded. And the profit margin output divides the after-tax goal by required revenue, so it is an after-tax margin, not a pre-tax one: 16.0% here, not 20.0%.

Worked example, checked against the tool

A small business has $5,000 in fixed costs, 40% variable costs, wants $2,000 in after-tax profit, and faces a 20% tax rate. In unit mode it sells at $25 with $10 variable cost per unit. The calculator produces: pre-tax profit needed $2,000 / (1 minus 0.20) = $2,500; required revenue ($5,000 + $2,500) / 0.60 = $12,500.00; break-even revenue $5,000 / 0.60 = $8,333.33; margin of safety ($12,500 minus $8,333.33) / $12,500 = 33.3%; profit margin on required revenue 16.0%; unit mode contribution margin $15 per unit, required units ($5,000 + $2,500) / $15 = 500 units, break-even 334 units.

Both modes agree, as they must: 500 units times $25 equals $12,500. Service businesses fit unit mode naturally, with the billable hour, the project, or the retainer as the unit. The math is identical; only the lens changes.

The tax mistake most calculators make

Here is where a popular desired-profit tool goes wrong, in its own worked example. NetCalculator’s desired profit calculator works a bakery case with $50,000 fixed costs, 40% variable costs, a $30,000 profit goal, and 20% tax. It computes required revenue before tax as ($50,000 + $30,000) / 0.60 = $133,333, then adds $133,333 times 20% = $26,667 of tax on top, for a final answer of $160,000.

Check that answer: $160,000 times 0.60 minus $50,000 equals $46,000 pre-tax profit. Tax at 20% equals $9,200. After-tax profit equals $36,800, not $30,000. The tool overshoots the goal by $6,800 of profit because adding tax on top of revenue double counts it. The correct method solves for the after-tax profit directly: required revenue equals (fixed plus profit / (1 minus tax)) divided by the contribution margin ratio. For the same inputs: ($50,000 + $30,000 / 0.80) / 0.60 = $87,500 / 0.60 = $145,833.33. Verify: $145,833.33 times 0.60 minus $50,000 equals $37,500 pre-tax, minus 20% tax equals $30,000 exactly. The wrong method tells the bakery to chase about $14,167 of revenue it does not need. The professional literature makes the same point: ICAEW’s breakeven analysis warns that simply adding a target net profit after tax to fixed costs is incorrect, because profits are derived post tax, and the target must be grossed up by (1 minus tax rate).

What moves the target most

Not every input deserves equal attention. On the worked example, the sensitivity table below (all values verified in the tool) shows variable cost share doing the heavy lifting, price second, and the tax rate a distant third for break-even, though it still lifts the target.

The lesson is practical: renegotiating a supplier contract or cutting payment fees usually beats chasing a higher price, because every point of variable cost share divides the whole target. The tax rate, by contrast, never moves break-even at all, since break-even profit is zero and zero taxed at any rate is still zero.

What competing calculators miss

The tax error documented above is the big one, and it is not hypothetical: NetCalculator’s published steps produce $160,000 where the correct answer is $145,833.33. Beyond that, the field splits into unit-only tools that cannot handle percentage cost structures and percent-only tools with no unit mode, so retailers and product businesses each get half an answer. The target-profit tools that do exist mostly ignore tax entirely, which silently treats the goal as pre-tax, or they show break-even without margin of safety, leaving the reader with a target and no sense of how much room for error it carries. None of the tools reviewed combine both modes, the exact gross-up, and the safety margin in one place. This page does, and it shows its working so the reader can check every number.

Once the target is set, the compound profit calculator models reinvesting that profit over time, the direct margin calculator isolates product-level margins feeding into it, and the gross profit rate calculator checks the margin the plan implies. For a product business working out its own margins first, the clothing profit margin calculator covers the per-product case.

Limits: what this planning math assumes

This is single-product, single-period planning math. It assumes fixed costs stay fixed, variable costs stay proportional, and one price applies to every unit. Real businesses have mixed margins, step-fixed costs like a second hire, and seasonal swings, so treat the answer as a planning target, not a forecast. For multiple products, use a weighted-average contribution margin ratio across the sales mix, and recalculate whenever the mix shifts. And because the tax input is a single rate you supply, it cannot capture progressive brackets, deductions, or credits: use your own effective rate, and confirm the tax side with a professional for a real filing decision.

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