Bottom-line margin after every cost — COGS, operating expenses, and taxes.
Inputs (monthly)
Gross revenue for the period
Cost of goods sold (product cost only)
Marketing, salaries, software, rent, shipping
Interest expense + tax provision
Results
Net Margin—%
Gross Profit
—
Operating Income
—
Net Income
—
Margin breakdown
Layer
Amount
% of Revenue
Benchmark
Gross Margin
—
—
50–70% DTC
Operating Margin
—
—
10–20% scaled DTC
Net Margin
—
—
5–15% DTC, 15–25% best-in-class
About this calculator
Net profit margin is the truest measure of business profitability — the percentage of every revenue dollar you actually keep after all costs are paid. Gross margin tells you about product profitability. Operating margin tells you about business efficiency. Net margin tells you whether you have a real business or just an expensive hobby that generates revenue.
For DTC ecommerce brands, the typical net margin progression looks like this: years 1–2 at -10% to 0% while burning cash on customer acquisition; years 3–4 at 0% to 8% as repeat purchase rates compound; mature brands at scale at 10% to 20%. Brands stuck below 5% net margin after year 3 usually have one of three problems: high CAC eating gross margin, a fixed-cost base that hasn't scaled with revenue, or product mix dragging gross margin down.
This calculator separates the three layers so you can diagnose which one is leaking. If your gross margin is below 50%, you have a product economics problem (COGS too high, pricing too low). If gross margin is healthy but operating margin is thin, you have a fixed-cost or marketing efficiency problem. If both are healthy but net margin disappears, taxes and interest are the culprit — usually either a poorly structured loan or growth-stage tax misunderstanding.
Pair this with the Contribution Margin Calculator (which strips out fixed OpEx to show per-order economics) and the LTV:CAC Calculator (which models whether your customer payback supports current spend levels). Together those three numbers tell you the complete profitability story.
Frequently asked questions
What is net profit margin?
Net profit margin is your final bottom-line profitability — what percentage of revenue you actually keep after all costs: COGS, operating expenses (marketing, salaries, software, rent), interest, and taxes. It is the most honest measure of business profitability because it excludes nothing.
What is a good net profit margin for ecommerce?
For DTC ecommerce brands, healthy net margins range from 5% to 15%. Sub-scale brands often run 0-5% or negative while reinvesting in growth. Best-in-class DTC brands at scale (with strong unit economics and low marketing dependency) can hit 15-25%. Marketplace and dropshipping businesses typically see 5-10% net margins.
What is the difference between gross margin, operating margin, and net margin?
Gross margin = (Revenue − COGS) / Revenue, measuring product profitability only. Operating margin = (Gross Profit − Operating Expenses) / Revenue, measuring profitability after running the business but before interest and taxes (also called EBITDA margin in many DTC discussions). Net margin = (Operating Income − Interest − Taxes) / Revenue, the final take-home percentage.
Why is my gross margin healthy but net margin negative?
This is the classic DTC trap. Strong gross margins (60%+) get eaten alive by high marketing spend and operating costs. If your CAC is high relative to AOV and first-purchase contribution margin, you can have 65% gross margin and still post a 5% net loss. Use this calculator alongside the LTV:CAC and Contribution Margin tools to diagnose where margin leaks.
Should I include founder salary in operating expenses?
Yes, if you want a realistic margin picture. Many bootstrapped brands artificially inflate margin by paying themselves nothing. If you want to model a sustainable business, include a market-rate salary for every role including yours. The "Founder Salary Calculator" can help size that number.