What is the net profit margin formula?

Net Profit Margin (%) = ((Revenue − Total Costs) ÷ Revenue) × 100. Revenue minus total costs gives net profit; dividing by revenue converts it to a percentage.

What is a good net profit margin?

It varies by industry. For ecommerce, 5–10% is common; software/SaaS businesses often reach 15–25%. Below 5% is considered thin and leaves little buffer for downturns.

What costs should I include?

Include everything: cost of goods sold (COGS), shipping, payment processing fees, advertising, salaries, rent, software subscriptions, taxes, interest, and any other operating expense.

What is the difference between gross margin and net margin?

Gross margin only subtracts COGS from revenue. Net margin subtracts ALL costs — operating expenses, taxes, and interest — giving a more complete picture of profitability.

Can net profit margin be negative?

Yes. A negative margin means you spent more than you earned. Early-stage businesses often run negative margins intentionally, but sustained negative margins indicate a structural cost problem.

How do I improve my net profit margin?

The two levers are revenue and costs. Increasing average order value, reducing ad spend per acquisition, negotiating better supplier rates, or cutting overhead all raise margin.

Net Profit Margin Calculator

Enter your revenue and total costs to instantly calculate net profit margin with a formula breakdown and interpretation guide.

Enter Your Figures

Total Revenue (gross sales)

Total Costs (all expenses)

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Enter revenue and total costs, then click Calculate.

Net Profit Margin

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Revenue

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Total Costs

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Net Profit

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Formula Breakdown

Net Profit = Revenue − Total Costs

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

Benchmark Guide

Margin Range	Interpretation
Below 0%	Loss — costs exceed revenue
0% – 5%	Thin — little buffer for downturns
5% – 10%	Average — typical for ecommerce
10% – 20%	Good — healthy profitability
Above 20%	Excellent — strong margin business

Summary

Net profit margin measures how much of each dollar of revenue a business keeps as profit after all expenses — including COGS, operating costs, taxes, and interest. It is one of the most watched profitability metrics for any ecommerce store or business. This calculator takes your total revenue and total costs, computes the net profit and margin percentage, and shows you where your result sits against common industry benchmarks.

How it works

Enter your total revenue (gross sales before deductions).
Enter your total costs (all expenses: COGS, shipping, ads, salaries, taxes, etc.).
The calculator subtracts costs from revenue to find net profit.
Net profit is divided by revenue and multiplied by 100 for the margin percentage.
A color-coded interpretation tells you whether your margin is strong, average, or thin.

Use cases

Evaluate overall profitability of an ecommerce store or product line.
Compare margin across different sales periods or channels.
Determine how close you are to break-even or a target margin.
Prepare financial summaries for investors or lenders.
Benchmark against industry averages before setting pricing.
Spot-check whether a recent cost increase eroded margins.

Frequently Asked Questions

Last updated: 2026-06-11 · Reviewed by Nham Vu