The bottom-line percentage. If gross margin shows product-level economics, net margin shows whole-business economics - the share of every dollar that actually stays with the business after every cost.
Definition
Net Margin - net profit expressed as a percentage of revenue. The single cleanest measure of how much of every dollar of revenue the business actually keeps after all costs.
Formula
Net Margin = Net Profit ÷ Revenue × 100%
Common uses
- Profitability comparison - across periods, businesses, or industries
- Valuation - buyer multiples are anchored on net margin trend
- Investor reporting - the headline profitability number
Watch out
Owner-operated businesses where the founder doesn't pay themselves a market salary look more profitable than they are. Always normalize for owner compensation before comparing.