How to calculate net profit margin

The result is your net profit margin. You can multiply this number by 100 to get a percentage.

Let’s say your business makes $12,000 in sales, it cost you $8,000 to make your products, and you spent another $2,000 on operating costs (such as overhead and taxes).

Total sales - (cost of goods sold + operating costs) = net income

$12,000 - ($8,000 + $2,000) = $2,000

Net income ÷ sales = net profit margin

$2,000 ÷ $12,000 = 0.1667

0.1667 × 100 = 16.67%

In this example, your business would have a net profit margin of 16%. In other words, 16% of your total sales revenue is profit.