Net Margin Calculator

Net margin calculator to measure net profit margin percentage

Net profit margin, often shortened to net margin, is one of the simplest ways to see how much of your revenue you keep after paying for everything. It answers a practical question: for every 100 in sales, how many end up as profit (or loss) after all costs are included. Those costs usually include cost of goods sold, salaries, rent, software, marketing, admin, interest, and tax. This calculator helps you convert that messy reality into a single percentage you can track and compare over time.

Most people confuse gross margin with net margin. Gross margin stops at direct costs, usually cost of goods sold. Net margin is stricter. It includes every expense, so it is closer to what you can actually reinvest, pay out, or hold as cash. That is why net margin is a useful sanity check even if you already look at a profit and loss statement. If revenue is growing but net margin is shrinking, it usually means costs are growing faster than sales or pricing is not keeping up.

To use this calculator, pick a time period that makes sense for your business: a month, a quarter, or a full year. Enter total revenue for that period. Then enter total costs for the same period. Total costs should include all expenses that hit your profit and loss statement for that period. The calculator returns two outputs: net profit (revenue minus costs) and net margin (net profit divided by revenue). If costs are higher than revenue, net profit and net margin will be negative. That is not an error. It reflects a loss, which can happen in early-stage businesses, seasonal operations, or during heavy investment periods.

Net margin is most useful when you use it for comparisons that are fair. Compare the same business across time periods of similar length. Compare products or business units only if the costs are allocated consistently. Compare against industry benchmarks only if your accounting treatment is similar. A service business with low direct costs often has a higher net margin than a retail business that carries inventory. The goal is not to chase a universal number. The goal is to understand what drives your margin and what levers you can pull: pricing, cost control, product mix, sales efficiency, and overhead discipline.

If you want to improve net margin, you usually start by making the numbers more accurate. Track revenue consistently, avoid mixing cash and accrual concepts, and make sure costs are captured in the right period. Once you trust the inputs, you can test changes: raise prices, renegotiate supplier costs, reduce churn, cut low-value spend, or change how you deliver. Because the output is a percentage, net margin also helps you avoid a common trap: focusing only on revenue growth while ignoring the cost structure that sits underneath it.

Assumptions and how to use this calculator

• Revenue and costs must be for the same period (for example, the same month or year).
• Total costs should include all expenses for the period, not only direct costs.
• Net profit is calculated as revenue minus costs, so negative results indicate a loss.
• If you use accrual accounting, use accrual-based revenue and expenses, not cash movements.
• This calculator is for analysis and planning, not for tax filing or formal financial statements.

Common questions

What is a good net profit margin?

There is no universal target because margins vary by industry, business model, and stage. A better approach is to track your own trend over time and compare against businesses with similar cost structures. A steady margin with growing revenue can be healthier than a high margin that is unstable or dependent on one-off factors.

Can net margin be negative?

Yes. If total costs are higher than revenue for the period, net profit is negative and net margin is negative. This commonly happens in launch phases, during expansion, or in seasonal businesses during off-peak periods.

Should I include owner salary in total costs?

If you want a realistic view of profitability, include a fair market salary for the work performed, even if you do not pay it out formally. Excluding owner compensation often inflates net margin and can hide whether the business is truly profitable.

What costs should I include in total costs?

Include all operating expenses and other costs that affect profit: cost of goods sold, payroll, rent, software, marketing, admin costs, bank fees, interest, and taxes. If you are unsure, use your profit and loss statement total expenses for the period.

How is net margin different from gross margin?

Gross margin looks at revenue minus direct costs, usually cost of goods sold. Net margin looks at revenue minus all costs, including overhead and other expenses. Net margin is closer to the profit that can be reinvested or retained.