Net margin
Also called net profit margin
Reviewed by Dasha ShakovVP Marketing, Proton
Updated
What is net margin?
Net margin is the percentage of revenue a company keeps as profit after all expenses, including COGS, operating expenses, interest and taxes. Net margin % = net income ÷ revenue; in distribution it is much smaller than gross margin, because warehouses, trucks and salespeople use up most of the gross profit.
Net margin example
On $50 million of sales at a 26% gross margin, a distributor ends the year with $1.5 million of net income after wages, rent, trucks, interest and taxes, a 3% net margin.
Related terms
- Gross marginGross margin is the share of sales a distributor keeps after paying for the goods it sold: gross margin % = (revenue − COGS) ÷ revenue.
- EBITDAEBITDA (earnings before interest, taxes, depreciation and amortization) is a company’s operating profit before financing costs, taxes and non-cash charges.
- Cost to serveCost to serve is what it costs to do business with a particular customer beyond the products themselves, from sales calls to delivery and collections.
- Cost of goods sold (COGS)Cost of goods sold (COGS) is the cost of the products a company sold during a period.
