What is net profit margin?

Net profit margin is the percentage of revenue that remains as profit after all expenses are deducted, including operating costs, taxes, interest, and depreciation. It's calculated as (Net Income ÷ Revenue) × 100. A 15% net profit margin means you keep $0.15 of every dollar in revenue as profit.

What is a good net profit margin?

A "good" net profit margin varies significantly by industry. Software/SaaS companies average 15-25%, retail businesses typically see 2-5%, restaurants average 3-9%, and professional services range from 10-20%. Compare against your specific industry benchmarks.

What's the difference between gross profit margin and net profit margin?

Gross profit margin only subtracts the direct cost of goods sold (COGS) from revenue, showing production efficiency. Net profit margin subtracts ALL expenses including operating costs, taxes, interest, and depreciation. Net margin gives you the true bottom-line profitability picture.

How do I improve my net profit margin?

There are two levers: increase revenue or decrease expenses. Specific strategies include: raising prices strategically, reducing COGS through supplier negotiation, cutting overhead costs, improving operational efficiency, and optimizing your tax strategy.

Why is my net profit margin negative?

A negative net profit margin means your total expenses exceed your revenue—you're operating at a loss. This is common for startups investing in growth, but unsustainable long-term. Identify which expense categories are highest and prioritize cost reduction or revenue growth.

How often should I calculate net profit margin?

Calculate monthly for operational decisions and quarterly for strategic planning. Tracking trends over time is more valuable than any single calculation—a declining margin over 3 quarters signals problems even if the absolute number looks healthy.

Net Profit Margin Calculator

Calculate your net profit margin instantly. Compare against 50+ industry benchmarks and get AI-powered recommendations to improve profitability.

Enter Your Values

Total Revenue*

Your total sales or revenue for the period (before any deductions)

Net Income (Profit After Tax)*

Your bottom-line profit after ALL expenses, taxes, and interest are deducted

Previous Period Margin (Optional)

Enter last period's net profit margin to see trend

Formula

Net Profit Margin = (Net Income ÷ Revenue) × 100

This formula shows what percentage of each revenue dollar you keep as profit after all expenses. A result of 12% means you retain $0.12 in profit for every $1 in sales.

Net Profit Margin15.0%

15.0% — Good margin, above average for most industries.

Total Revenue$1,000,000

Net Income$150,000

Total Expenses$850,000

Profit Per Revenue Dollar$0.15

Margin HealthAbove Average

If Expenses -10%23.5% margin (+8.5pp)

Revenue Needed for 20% Margin$1,062,500

Net Profit Margin Benchmarks by Industry

Excellent20%+ — Top-tier profitability (Software, SaaS)

> 20%

Good10-20% — Above average (Professional Services)

10% – 19.99%

Average5-10% — Industry standard (Manufacturing)

5% – 9.99%

Below Average0-5% — Thin margins (Retail, Restaurants)

0% – 4.99%

LossNegative — Operating at a loss

< -0.01%

Source: NYU Stern, Industry Benchmarks 2024

How to Calculate Net Profit Margin

Enter your total revenue for the period
Enter your net income (profit after all expenses and taxes)
Optionally add previous period margin for trend analysis
View your net profit margin percentage
Compare against industry benchmarks
Chat with AI analyst for personalized improvement recommendations

Net Profit Margin Benchmarks by Industry

15-25%

Software/SaaS

10-20%

Professional Services

2-5%

E-commerce/Retail

3-9%

Restaurants

5-10%

Manufacturing

5-15%

Healthcare

2-6%

Construction

15-30%

Financial Services

Source: NYU Stern, Industry Benchmarks 2024

Net Profit Margin Calculator

Net Profit Margin Benchmarks by Industry

How to Calculate Net Profit Margin

Net Profit Margin Benchmarks by Industry

Frequently Asked Questions

What is net profit margin?

What is a good net profit margin?

What's the difference between gross profit margin and net profit margin?

How do I improve my net profit margin?

Why is my net profit margin negative?

How often should I calculate net profit margin?