The Net Profit Percentage indicates the percentage of revenue that remains as profit after all expenses, including direct costs, operating expenses, and labor expenses, have been deducted.
This might be the most important metric, as a healthy profit percentage can indicate strong performance, even if other metrics fall short. The goal of running a business is to generate a healthy profit even if you are a mission driven company. It is important to note that profit margin should be calculated after all business expenses have been totaled including paying owners or partners a market rate salary. If you pay yourself as owner draws, and are paying yourself below market rate salary and there is no money left over, your company is not profitable.
Net Profit % = (Net Revenue – Net Expenses) / (Net Revenue x 100)
So Net Profit Margin % indicates what percentage of your revenue is leftover after all expenses.