Variables and units
Net Profit
Profit after all costs for the period.
currency
Revenue
Total sales revenue for the period.
currency
Franchise · Margin
Profit Margin
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Use profit margin to see how much of every dollar of sales you actually keep after all costs, a fast health check for a shop or franchise.
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Tea shop month
Net ProfitRevenue×100
$6,000 of net profit on $40,000 of sales is a 15% profit margin.
Common mistakes
- Using gross profit instead of net profit.
- Leaving owner pay out of costs.
Step-by-step example
Tea shop month
1. Start with the example inputs
- Net Profit$6,000
- Revenue$40,000
2. Apply the formula
Net ProfitRevenue×1003. Run the numbers
15%
$6,000 of net profit on $40,000 of sales is a 15% profit margin.
What this result means
A profit margin of 15% means that share of every sales dollar survives as net profit after all costs. Healthy margins differ sharply by concept — food service often runs single digits while service businesses can run far higher — so compare against your own history and your segment, not a universal number.