Profit is the financial benefit gained from an activity that exceeds the resources invested in it. Business owners use profits to pay for costs, including salaries, rent, and inventory, and to invest in growth and new opportunities. Profitable businesses often attract investors because they can return cash to shareholders as dividends or reinvest them into the company, increasing stock value.

The goal of every business is to earn more money than it spends. This is called profitability, and it applies to everything from a lemonade stand to a global technology corporation. The more profitable a company is, the more sustainable it is and the easier it is to grow and expand.

There are three major types of profit: gross profit, operating profit, and net profit (also known as the “bottom line” on an income statement). Gross profit is sales revenue minus cost of goods sold (COGS), which gives insight into how efficiently your company produces and sells its products or services. Operating profit deducts other overhead costs such as payroll, rent, and utilities from gross profit to give a clearer picture of your core business operations. Net profit is the final figure after all costs and taxes are deducted, giving you the total amount of money you have earned.

To increase profits, focus on growing revenue while managing expenses effectively for long-term sustainability. To do this, create a profit plan that includes specific and measurable goals. Review these plans on a regular basis to ensure that they remain relevant to your business.