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What Is Net Profit?
Net profit (also called net income or the "bottom line") is what remains after subtracting all costs from revenue:
Net Profit = Revenue - COGS - OpEx - Interest - Taxes
The Income Statement Waterfall
| Line | Formula |
|---|---|
| Revenue | Top-line sales |
| Gross Profit | Revenue − COGS |
| Operating Income (EBIT) | Gross Profit − Operating Expenses |
| EBT (Earnings Before Tax) | Operating Income − Interest |
| Net Profit | EBT − Taxes |
Net Profit Margin Benchmarks
| Industry | Typical Net Margin |
|---|---|
| SaaS | 15–30% |
| Consulting | 15–25% |
| Retail | 2–5% |
| Restaurants | 3–9% |
| Manufacturing | 5–10% |
| Healthcare | 4–8% |
Gross vs Operating vs Net Margin
- Gross margin shows production efficiency — is the core product profitable?
- Operating margin shows business model efficiency — can you run the company profitably?
- Net margin shows final owner returns after financing and taxes.
All three margins compressing together signals a systemic problem. A declining net margin with stable gross margin often points to rising SG&A (Selling, General & Administrative expenses) or interest costs.