The short answer: profit margin is your profit expressed as a percentage of sales. Gross margin = gross profit ÷ sales × 100. Net margin = net profit ÷ sales × 100. The percentage lets you compare profitability across time, products and branches, no matter the size of the sale.
The two margins to know
- Gross margin — after the cost of goods only. Shows if your pricing and buying work.
- Net margin — after all expenses too. Shows what you actually keep.
(New to the difference? Start with gross profit vs net profit.)
Worked examples
Say you sell an item for 1,000 that cost you 700. Gross profit is 300, so gross margin is 300 ÷ 1,000 × 100 = 30%. Now for the whole month: sales 500,000, gross profit 150,000, and after 110,000 of expenses your net profit is 40,000. Net margin is 40,000 ÷ 500,000 × 100 = 8%.
Why the percentage matters
A margin lets you compare fairly. A 300 profit sounds the same on a 1,000 sale and a 5,000 sale, but the margins (30% vs 6%) tell very different stories. Tracking margin over time also catches slow erosion from discounts or rising costs long before it hits your bank balance.
How to improve your margin
- Review pricing — small, justified increases flow straight to margin.
- Lower cost of goods — negotiate, buy better, cut waste.
- Shift the mix — sell more of your higher-margin products.
- Control discounts — they cut margin fast and quietly.
See margins automatically
RushFlow calculates gross and net margin from your real sales and costs — per product, per branch, per period — so you can act on the numbers. See the live demo.