Turnover vs Gross Profit: Key Differences Every Business Owner Should Know

Turnover and gross profit are two crucial financial metrics, but they mean very different things. Learn the difference clearly, with examples and a free calculator to check your figures.
May 24, 2025
Gross Margin
turnover vs gross profit

If you’re serious about improving your business performance, you need to understand the difference between turnover and gross profit.

While they’re both financial figures you’ll see at the top of an income statement, they tell very different stories about your business health.

In this guide, we'll explain the differences clearly, provide examples, and give you a free calculator to check your own numbers.

Quick Definitions

Turnover:

The total income a business generates from selling goods or services — before any costs are deducted.

Gross Profit:

The amount left after subtracting the direct costs (Cost of Goods Sold — COGS) involved in producing the goods or services sold.

Example: Turnover vs Gross Profit

Imagine a business selling bicycles.

  • Turnover (Sales) = £300,000
  • Cost of Goods Sold (COGS: bikes, parts, materials) = £180,000

Calculations:

Gross Profit = Turnover - COGS

Gross Profit = £300,000 - £180,000 = £120,000

Turnover vs Gross Profit at a Glance

Aspect Turnover Gross Profit
What it measures Total sales revenue Revenue minus direct production costs
Expenses considered None (before costs) Only direct costs (COGS)
Indicates Sales activity Core operational efficiency
Report location Top line Mid-level (after COGS)

Why the Difference Matters

  • High turnover is meaningless if gross profit is poor.
  • Strong gross profit allows a business to cover operating costs (like salaries, rent, marketing) and still make a net profit.
  • Businesses with low gross profit margins must either sell in huge volumes or cut costs aggressively to survive.

Tip: Improving gross profit is often faster and more sustainable than trying to massively grow turnover.

Interactive Turnover and Gross Profit Calculator

Use this simple tool to check your own figures:

Turnover and Gross Profit Calculator

Enter your turnover and cost of goods sold (COGS) to calculate gross profit.





Final Thoughts

Turnover shows your business’s total sales.
Gross profit shows whether you’re making money efficiently after covering direct costs.

You can’t build a sustainable business on turnover alone.
You need healthy gross profits to survive, grow, and thrive.

Make sure you track and optimise both!

Strengthen your business financial knowledge with these related guides:

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