Net profit margin

Net profit margin is the bottom line as a percentage. It starts from revenue and takes away everything: product costs, shipping, fees, advertising, apps and tools, staff, rent, interest and taxes. What remains, divided by revenue, is the net margin.

It answers the question that matters most: does the business make money? A store can show a strong ROAS and growing sales while its net margin stays thin or negative, because fixed costs and small fees add up.

• Raise gross margin through pricing and supplier costs.
• Lower acquisition costs with better creatives and more repeat customers.
• Review app and tool subscriptions regularly and cancel the ones you no longer use.
• Watch refunds and chargebacks, which come straight out of profit.

Common mistakes: confusing net margin with gross or contribution margin, leaving out one-off costs or the pay you take yourself, and judging a single month.

Seasonal spend, such as stock bought ahead of a sales peak, can distort one month, so look at a quarter or a year as well.