Profit Goal Calculator

Enter Calculation

Fixed Costs ($)

Target Profit ($)

Variable Cost Ratio (% of revenue)

Results

Required Revenue to Hit Your Profit Goal

$50,000

total sales needed

Contribution Margin	60%
Estimated Variable Costs	$20,000
Total Costs	$40,000

What Is the Profit Goal Calculator?

The Profit Goal Calculator tells you how much revenue your business must generate to hit a specific profit target. Instead of guessing sales targets, you work backward from the profit you want, accounting for both your fixed costs and the portion of each sale eaten up by variable costs. It is a universal financial planning tool that works for any currency or industry.

How to Use It

Enter three numbers: your fixed costs (rent, salaries, insurance — costs that don't change with sales volume), your target profit (the profit you want left over), and your variable cost ratio (variable costs such as materials and commissions expressed as a percentage of revenue). The calculator returns the total revenue you must achieve, plus your contribution margin and estimated cost breakdown.

The Formula Explained

$$\text{Required Revenue} = \dfrac{\text{Fixed Costs} + \text{Target Profit}}{1 - \text{Variable Cost Ratio}}$$ The denominator, \(1\) minus the variable cost ratio, is your contribution margin ratio — the fraction of every sales dollar available to cover fixed costs and profit. Dividing the total amount you need to cover (fixed costs plus profit goal) by this margin gives the sales figure required.

The required revenue formula breaks down into fixed costs, target profit, and the variable cost ratio.

Worked Example

Suppose fixed costs are $20,000, your target profit is $10,000, and variable costs run 40% of revenue. The contribution margin is \(1 - 0.40 = 0.60\). $$\text{Required revenue} = \dfrac{20{,}000 + 10{,}000}{0.60} = \dfrac{30{,}000}{0.60} = \$50{,}000$$ At $50,000 in sales, variable costs are $20,000, leaving $30,000 to cover the $20,000 fixed costs and produce the $10,000 profit.

Required revenue covers fixed costs and variable costs while leaving the target profit.

FAQ

What is the variable cost ratio? It is total variable costs divided by revenue, expressed as a percentage. If materials and commissions cost $40 for every $100 of sales, the ratio is 40%.

Why must the ratio be below 100%? If variable costs equal or exceed 100% of revenue, every sale loses money and no revenue level can produce a profit — the contribution margin must be positive.

Does this include taxes? No. The target profit here is operating profit before tax. Set your target profit higher if you need a specific after-tax figure.