Vertical Financials
Profitability

Net Profit Margin

Definition

The percentage of every sales dollar that ends up as profit after all expenses.

Formula

Net Profit Margin % = Net Income ÷ Net Sales × 100

Net margin is what you keep. Many e-commerce brands run in the high single digits; improving it usually comes from margin structure, not just more sales.

It is best viewed alongside gross and contribution margin to see where profit leaks. Watch for: growing revenue with a shrinking net margin, which often means fixed costs or ad spend grew faster than sales.

Example

$180,000 of net income on $2.4M of net sales is a 7.5% net profit margin.

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