Profit Projection Calculator Formula

Understand the math behind the profit projection calculator. Each variable explained with a worked example.

Use the Profit Projection Calculator

Formulas Used

Current Annual Profit

current_profit = revenue - costs

Projected Revenue

projected_revenue = revenue * pow(1 + growth_rate / 100, years)

Projected Costs

projected_costs = costs * pow(1 + cost_growth / 100, years)

Projected Profit

projected_profit = revenue * pow(1 + growth_rate / 100, years) - costs * pow(1 + cost_growth / 100, years)

Projected Profit Margin

projected_margin = revenue * pow(1 + growth_rate / 100, years) > 0 ? ((revenue * pow(1 + growth_rate / 100, years) - costs * pow(1 + cost_growth / 100, years)) / (revenue * pow(1 + growth_rate / 100, years))) * 100 : 0

Variables

VariableDescriptionDefault
revenueCurrent Annual Revenue(USD)500000
costsCurrent Annual Costs(USD)400000
growth_rateAnnual Revenue Growth Rate(%)20
cost_growthAnnual Cost Growth Rate(%)10
yearsProjection Period(years)5

How It Works

How to Project Future Profit

Formula

Projected Profit = Revenue x (1 + Revenue Growth%)^Years - Costs x (1 + Cost Growth%)^Years

This model assumes constant annual growth rates for both revenue and costs. When revenue grows faster than costs, profit margins expand. When costs grow faster, margins shrink.

Worked Example

A business with $500,000 revenue and $400,000 costs. Revenue grows at 20%/year and costs grow at 10%/year over 5 years.

revenue = 500000costs = 400000growth_rate = 20cost_growth = 10years = 5
  1. 01Current profit = $500,000 - $400,000 = $100,000
  2. 02Projected revenue = $500,000 x (1.20)^5 = $1,244,160
  3. 03Projected costs = $400,000 x (1.10)^5 = $644,204
  4. 04Projected profit = $1,244,160 - $644,204 = $599,956
  5. 05Projected margin = $599,956 / $1,244,160 x 100 = 48.22%

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