Understanding profit is essential to anyone interested in starting their own business. It is also important for anyone who works in a business that seeks to make a profit. Much of the misunderstanding about profit is related to a lack of understanding of the terms used in business that explain financial decisions. After all, the higher the risk the greater return the entrepreneur would expect for the investment.
Many new entrepreneurs forget to count the costs of their time and take out a regular salary.
Or when times are tough the salary is the first thing they forget. Profit is not the difference between the costs of the product or service and the price being charged for it. These include such items as rent or mortgage payments, utilities, regular salaries, insurance, etc. Finally you must pay taxes out of the income before actually determining your profit from your business. After all these costs, the owners' profit is what is left .