How to Calculate Profit Per Kg in a Cooking Gas Business
Two cooking gas businesses can sell the same amount of LPG and still make very different profits.
The difference is often in the numbers behind each kilogram sold. If you know your cost per kg, selling price and operating expenses, you can see what the business is actually earning.
Here is a simple way to calculate profit per kg in a cooking gas business without making the calculation more complicated than it needs to be.
What does profit per kg mean?
Profit per kg is the amount left from each kilogram of LPG after accounting for the cost of getting that gas ready for sale.
The basic calculation is:
Profit per kg = Selling price per kg − Cost per kg
This gives you the gross profit per kg. It is not the same as your final business profit because you still have other expenses to pay.
Start with your actual cost per kg
This is where many small businesses get their calculation wrong.
Do not look only at the amount you paid for the LPG. Work out the cost of the gas you are actually selling.
For example, imagine a business buys LPG at an effective cost of ₦1,000 per kg. This figure is only an example, not a current market price.
If the business sells that gas for ₦1,200 per kg, the gross profit is:
₦1,200 − ₦1,000 = ₦200 per kg
The important point is that your own purchase cost should come from your records. LPG prices can change, so yesterday’s cost may not be today’s cost.
How much gross profit can you make?
Once you know the profit per kg, multiply it by the number of kilograms you sell.
Using the example above, suppose the business sells 500 kg in a period.
500 kg × ₦200 = ₦100,000 gross profit
That ₦100,000 is gross profit before other business expenses. It should not be treated as money you can simply take home.
What expenses should you consider?
Your cooking gas business may have costs that do not appear in the LPG purchase price.
These can include rent, staff wages, electricity, transportation, delivery costs, equipment maintenance, payment charges and other operating expenses.
Some expenses rise as sales increase. Others may stay fairly stable each month. Keep both types in your records.
For example, if your gross profit for the month is ₦300,000 and your operating expenses are ₦180,000, your remaining operating profit is ₦120,000.
This is why a business can have a healthy-looking sales figure and still have little money left at the end of the month.
Do not confuse markup with profit margin
Markup and profit margin describe different things.
If your cost is ₦1,000 per kg and you sell at ₦1,200, your gross profit is ₦200 per kg.
Your markup on cost is 20% because ₦200 is 20% of ₦1,000.
Your gross profit margin is different. It is ₦200 divided by ₦1,200, which is about 16.7%.
Knowing the difference helps you compare your pricing more accurately.
What if the LPG purchase price changes?
This is one reason you should review your numbers regularly.
Suppose your cost increases from ₦1,000 to ₦1,100 per kg while your selling price remains ₦1,200.
Your gross profit then falls from ₦200 to ₦100 per kg.
Your sales volume may look the same, but the amount you earn from each kilogram has changed.
This is why gas businesses should not set a price once and forget about it. Your pricing should reflect your current costs and operating expenses.
Keep gas sales separate from other income
A cooking gas business may earn money from more than LPG refills.
You might also sell cylinders, regulators, hoses, burners, accessories or offer other services.
Keep these sales separate in your records. Each product can have a different purchase cost and profit margin.
This makes it easier to see whether your LPG sales, accessories or other services are contributing most to the business.
If you are building your records from scratch, our guide on keeping simple records for a cooking gas business can help you organise the basics.
A simple monthly calculation
At the end of each month, you can use a simple calculation:
Total LPG sales − LPG cost = Gross profit
Then:
Gross profit − operating expenses = Operating profit
Your monthly LPG sales should come from the actual quantity sold and the prices charged. Your LPG cost should come from your purchase records.
This simple approach gives you a clearer picture than looking at cash received alone.
Why profit per kg matters
Knowing your profit per kg helps you understand how much each sale contributes to the business.
It can also help you review pricing, control costs and set realistic sales targets. Your break-even calculation becomes more useful when you know what each kilogram contributes toward your fixed costs.
For a deeper look at that calculation, see our guide on how to calculate the break-even point for a cooking gas business.
Frequently asked questions
How do I calculate profit per kg of cooking gas?
Subtract your actual cost per kg from your selling price per kg. The result is your gross profit per kg.
Is profit per kg the same as net profit?
No. Profit per kg usually refers to gross profit before expenses such as rent, wages, transport and utilities.
Should I include delivery costs?
Yes, if delivery is part of your business cost. Track it so you can see what your sales actually contribute after operating expenses.
Can my profit per kg change?
Yes. It can change when your LPG purchase cost, selling price or related expenses change.
Should I calculate profit every day?
You can track daily sales and costs, but a monthly review gives you a clearer view of overall business performance.
Know the number behind every kilogram
A cooking gas business is easier to manage when you know what each kilogram is contributing.
Keep your LPG purchase records, sales records and operating expenses up to date. Then review the numbers regularly instead of relying on cash in the drawer as your measure of profit.
Good records make it easier to spot changes early and make better day-to-day business decisions.
