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You're just a few steps away from smarter profit planning:
Profit margin tells you how much of your revenue turns into actual profit after covering all expenses. It's a key indicator of financial health and pricing efficiency.
Profit Margin (%) = (Net Profit / Revenue) * 100Where:
Revenue = Total income from sales or services
Net Profit = Revenue minus all expenses (COGS, operating costs, taxes, etc.)
If your business earns $100,000 in revenue and has $20,000 net profit:
Profit Margin = ($20,000 / $100,000) * 100 = 20%An online retailer earns $250,000 in revenue with $30,000 net profit:
Profit Margin = ($30,000 / $250,000) * 100 = 12%After switching to local suppliers and cutting shipping costs, net profit increases to $50,000, raising the margin to 20%.
A lean consultancy generates $120,000 in revenue with $90,000 in profit:
Profit Margin = ($90,000 / $120,000) * 100 = 75%Strong margin reflects high efficiency, but the firm is vulnerable due to client concentration.
For deeper insights, check Wikipedia or this helpful Investopedia guide.
Try the calculator now and uncover how much profit your business is really keeping!
| Revenue | Net Profit | Profit Margin |
|---|---|---|
| $100,000 | $20,000 | 20% |
| $500,000 | $75,000 | 15% |
| $0 | $5,000 | Undefined |
| $80,000 | -$10,000 | -12.5% |
| $1,000,000 | $20,000 | 2% |