Profit Margin: What It Is and How to Calculate It

[suchona.kani.z]

To understand the importance of the profit margin we must start from an assumption: “if you can't measure something, you can't improve it”.

It is one of the most famous quotes by Lord William Thomson Kelvin (1824 - 1907), a British mathematician, physicist and engineer.

Perhaps read like this, on the first line of this article, this sentence will tell you very little. But I am convinced that, once you have reached the end, you will be able to understand its deep meaning and you will have to agree.

You know, economics is not for everyone. After all, why korea email list would we turn to a tax consultant to fix our accounting?

But not all economic matters can be left in the hands of others, on the contrary. You are probably an entrepreneur who has already started (or is planning to do so) his online business, perhaps an e-commerce or a dropshipping store , and wants to improve it or start off in the best way.

That's why in this short guide I want to explain to you what the profit margin is and how to calculate it, what the difference is between net profit margin and gross profit margin and how you can maximize it.

Well, there are actually quite a few other concepts that you need to know, but I'm not going to write them down here in the introduction, I don't want to scare you. Let's take it one step at a time, okay?

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Profit Margin: Definition
calculate profit margin

As a first step, let's give a definition of profit margin.

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This is the percentage of profit that exists between sales revenue and production costs. It is an indicator of the profitability of a business project , in short.