How it’s calculated
Net Profit can be calculated before owner’s salary (bos) is removed or after owner’s salary (aos) is removed.
Net Profit (bos) calculated as:
Total Income – Expenses (excluding Owner’s Wages and Superannuation)
Net Profit (aos) is calculated as:
Total Income – Expenses – Owner’s Wages – Owner’s Superannuation
How It’s Used
The Net Profit Benchmark serves as a good baseline measure of a company’s performance. Because owners nominate how much they pay themselves, Net Profit (bos) is used as a means to normalise results for the purposes of comparison. Net Profit (aos) can be used to see how much an owner can take home before it impacts the business functioning or the impact of an owner heavy firm.
As with other performance metrics, the Net Profit Benchmark enables owners to assess whether their business costs and productivity are in check. For example, a low Net Profit result indicates cost of goods, operating expenses and staff productivity should be analysed more closely. Whereas a strong Net Profit may indicate opportunity for growth and investment.