Finance · business glossary
What is Net margin?
By Shivam Bhandari · Reviewed 31 October 2026 · How we write
definition
The percentage of revenue left as actual profit after every cost — direct, overhead, interest, and tax — has been subtracted.
Net margin explained
Net margin is the share of revenue that remains as profit after every cost — product costs, salaries, rent, marketing, interest and tax. It is the ‘bottom line’ as a percentage.
formula
Net margin % = Net profit ÷ Revenue × 100
example
A business with ₹50 lakh revenue and ₹4 lakh net profit after all costs and tax has an 8% net margin.
why it matters
It shows how much of every sale the owners actually keep, and allows comparison with competitors of different sizes.
common mistake
Judging a business only by revenue growth while net margin quietly shrinks.
Frequently asked questions
What is Net margin?
The percentage of revenue left as actual profit after every cost — direct, overhead, interest, and tax — has been subtracted. Net margin is the share of revenue that remains as profit after every cost — product costs, salaries, rent, marketing, interest and tax. It is the ‘bottom line’ as a percentage.
How do you calculate Net margin?
Net margin % = Net profit ÷ Revenue × 100. A business with ₹50 lakh revenue and ₹4 lakh net profit after all costs and tax has an 8% net margin.
Why does Net margin matter?
It shows how much of every sale the owners actually keep, and allows comparison with competitors of different sizes.
What is a common mistake with Net margin?
Judging a business only by revenue growth while net margin quietly shrinks.
Related terms
Gross margin
The percentage of revenue left after subtracting the direct cost of making or delivering what you sold, before any overhead is deducted.
EBITDA
Earnings before interest, tax, depreciation, and amortisation — a measure of operating profitability that strips out financing and accounting decisions to make businesses easier to compare.
Fixed costs
Costs that stay roughly the same regardless of how much you sell, like rent or salaried staff.