Profit Target Calculator
Quickly calculate the profit you need to generate to cover all your dividends and targets.
1. Your situation
£
%
£
This might be for increased working capital, pay down debt or growth.
2. Profit Target
Dividends
£0
Your annual dividend
£0
Your shareholding
Additional cash required
£0
Profit After Tax
£0
Corporation Tax
£0
Small Profits Rate (19%)
£0
Marginal Relief (26.5%)
£0
Main Rate (25%)
£0
Effective Tax Rate
0%
Profit Target
£0
The Target Profit Formula Explained
To determine the revenue required to hit a desired profit target, our calculator uses the core breakeven and target profit equation:
Required Revenue = (Fixed Costs + Target Net Profit) / Gross Profit Margin %
Key Definitions:
- Fixed Costs (Overheads): Monthly expenses that remain constant regardless of sales volume, such as office rent, software subscriptions, insurance, and core staff salaries.
- Gross Profit Margin (%): The percentage of revenue retained after paying direct cost of sales (COGS or direct delivery labor).
- Target Net Profit: The net profit you wish to retain after all operating costs and tax obligations are met.
4 Steps to Build an Achievable Profit Target Strategy
- Audit Fixed Overheads Accurately: Include realistic director remuneration, inflation adjustments, and upcoming capital investments in your fixed cost baseline.
- Protect Direct Delivery Margins: Monitor gross margins closely. If direct labor or delivery costs increase without a corresponding price increase, required revenue will surge..
- Factor in Tax and Cash Reserves: Remember that net profit figures must cover Corporation Tax obligations and build cash reserves for working capital buffer.
- Reverse-Engineer Your Sales Pipeline: Translate required revenue into concrete sales metrics—such as average contract size, retainer count, or monthly unit sales.
Frequently Asked Questions About Profit Planning
What is a good net profit margin target for a UK service business?
Healthy UK service businesses and creative agencies typically target a net profit margin of 15% to 25% after accounting for commercial director salaries.
What is the difference between gross profit and net profit targets?
Gross profit is revenue minus direct delivery costs. Net profit is what remains after deducting all overheads, administrative costs, and operating expenses.
What should I do if my required revenue target is too high?
If the required revenue exceeds your team's current delivery capacity, you must either increase pricing, reduce fixed overhead drag, or improve gross profit margins.
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