Net margin calculator

Net margin is net profit divided by revenue, after every cost including operating expenses, interest and tax. Revenue of 250,000 with total costs of 235,000 gives a 6% net margin — a typical figure for a healthy small business.

The gap between gross and net margin is the most informative number in a small business. A retailer at 45% gross and 4% net is spending 41 points of revenue on running the place, and that is where any improvement has to come from — a further point of gross margin is worth much less than a point off overheads. Net margin is also the figure most distorted by one-off items, so a single year rarely tells the story; three consecutive years does.