Net Margin
Net margin shows profitability after all expenses. Formula: Net margin = Net income ÷ Revenue. Use this calculator to measure bottom‑line profitability. Enter total revenue and net income to compute net margin and compare performance across periods.
What is net margin?
Net margin measures the percent of revenue left after all expenses, including operating and non‑operating items. It reflects true bottom‑line profitability.
Why it matters
- Shows how efficiently revenue converts to profit.
- Complements gross margin by accounting for the full cost structure.
- Important for valuation and long‑term sustainability.
How to calculate
Net margin (%) = Net income ÷ Revenue × 100.
Example
Revenue $500,000.00, Net income $50,000.00 ⇒ Net margin 10.0%.
Improving net margin
- Increase pricing power and reduce discounts.
- Improve gross margin (lower delivery costs) and optimize OpEx.
- Streamline go‑to‑market and automate manual processes.
FAQ
How does net margin differ from gross margin? Gross margin excludes operating expenses; net margin includes them.
What’s a good net margin in SaaS? It varies widely by stage; low single digits in growth, higher in mature firms.
Should I exclude one‑time costs? Track adjusted margin for comparability, but keep GAAP margin for completeness.