Net Profit Margin
What the business actually keeps once every bill for the period is paid.
What it means
Net Profit Margin is Net Profit divided by Total Sales, shown as a percentage of what customers paid. Net Profit is what survives every cost the app knows about — product, delivery, payment fees, tax, Ad Spend, plus the custom and fixed expenses you enter yourself. It's the last of three margin steps: Gross MarginGross MarginProfit after product cost; the ceiling on what you can spend to grow.60% or more is healthy counts product cost, Contribution MarginContribution MarginProfit left after variable costs to fund the business.30% or more is healthy counts every variable cost, this one counts the lot.
Show the math
Formula and a worked example
Net Profit is Total Sales minus every cost: tax, shipping, Ad Spend, product cost (COGS) and payment gateway fees, then your custom and fixed expenses on top.
Total Sales is what customers actually paid, after discounts and returns.
Worked example. A month brings €200,000 of Total Sales. Variable costs take €150,000, leaving €50,000 of Contribution Profit — a 25% Contribution Margin. Custom and fixed expenses are €26,000: €4,000 rent, €18,000 salaries, €4,000 software. Net Profit is €24,000, so Net Profit Margin = 24,000 ÷ 200,000 = 12%.
The 13-point drop from 25% to 12% is your fixed cost expressed as a share of sales. It shrinks as you grow and widens the moment sales fall, which is why a quiet month hurts this number twice.
It answers the question
After everything was paid, what share of sales did the store keep? Keep €8 of every €100 and your Net Profit Margin is 8%.
Why it matters
Everything above this can look healthy while this one is negative. A store can carry a proud markup, efficient ads and rising sales and still keep nothing once the overhead is paid, which makes this the number that says whether the business works at the size it currently is.
It also decides what happens next. The cash that buys your next stock order, pays a new hire or funds a bigger ad budget comes from here, so a thin margin isn't only a poor month — it's a slower year.
What good looks like
These bands assume your custom and fixed expenses are complete in Cost Settings. If they aren't, the number is flattering you. Read it by the month rather than the week, too — an annual software bill or a big stock order lands in one period and drags a single month down.
How to improve it
| Lever | What you do | Expect | How long | Watch out for |
|---|---|---|---|---|
| Fast Pause your worst campaigns | Pause every campaign that has returned under €2 of sales per €1 spent for 14 days straight, and leave the rest untouched | Net Profit Margin up 1–3 points | 2 weeks | Total Sales falls with the spend while the fixed costs stay put, so you keep a bigger share of a smaller number. Check the euros, not only the percentage. |
| Fast Audit the fixed costs line by line | Go through Cost Settings and cut the tools and subscriptions nobody opens | A permanent point or two | 1 week | You can only do this once — the second pass finds nothing — and cutting a tool the team relies on costs more in hours than it saves in euros. |
| Slow Sell more to the customers you have | Build the flows and post-purchase emails that bring people back without paying for the click | Net Profit Margin up 2–5 points | 1–2 quarters | Retention work takes months to show. Push repeat purchases with heavy codes and you trade the margin away to get the order. |
| Slow Grow sales without growing overhead | Hold headcount and warehouse flat while volume rises, so fixed cost shrinks as a share of sales | Every extra €10,000 of sales lands harder | 2+ quarters | It only holds while nothing breaks. The month you hire or take more space, the gain resets to zero. |
Every lever costs something somewhere. The last column is the one to read twice.
Read it with
Net Profit Margin alone tells you the outcome. Next to Total Sales, it tells you whether growth is paying for itself.
Growing and keeping it
Sales rose and you kept a bigger share of them. This is the only corner where adding budget is a safe decision.
Smaller and tighter
You cut cost faster than sales fell. It reads well and it doesn't grow anything.
Growth you're paying for
More sales, less kept. If Contribution Margin held steady, the extra cost is fixed rather than variable — someone added overhead.
Fixed costs are exposed
Sales fell and the bills didn't. Every further quiet month makes this worse, so act in weeks rather than quarters.
The gap between them is your fixed cost as a share of sales. Hold Contribution Margin steady while this falls and nothing about your selling changed — your overhead did. One number can't tell you which of the two moved; the pair can.
Repeat orders arrive without an acquisition cost, so a rising share of them should lift this without you touching a price. Returning Orders climbing while Net Profit Margin doesn't means your problem sits in delivery, product cost or overhead rather than in winning customers.
Common misreads
Sales aren't profit. A month with twice the revenue and half the margin keeps less money than the quiet one before it. Read this number first, then the revenue that produced it.
Check Cost Settings before you believe it. With salaries, rent or software left empty, the app counts them as zero and your store reads like one with no staff and no premises. If this sits within a point of Contribution Margin, that's what's happened.
One month isn't a trend. A yearly insurance bill, a large restock or a Black Friday discount all land in a single period. Put 3 months side by side before you cut anything.
Also called
Net Margin · net profit percentage · bottom-line margin · profit margin
See yoursYour Net Profit Margin for the period, with every cost that took a bite out of it listed underneath.
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