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Xero Net Profit Margin

Net Profit Margin is a financial metric that represents the percentage of profits earned from revenue after all expenses, including taxes and interest, are subtracted.

With Databox you can track all your metrics from various data sources in one place.

Net Profit Margin 10% Start tracking this metric
  • About
  • Tech details

What Is Net Profit Margin

Net profit margin is a financial ratio that companies use to measure the profitability and efficiency of their core operations.
It represents the percentage of revenue that remains as profit after deducting all expenses, including the cost of goods sold, operating expenses, taxes, and interest.

How to Calculate Net Profit Margin

When assessing a company’s financial health, one of the first things investors and lenders evaluate is the net profit margin.
To calculate it, you first need to identify your net profit and total revenue.

Then, you can follow this formula:

Net Profit Margin = (Net Profit / Revenue) x 100

Let’s say a business generated $1,000,000 in revenue for the year and calculated a net profit of $230,000.
Following the formula above, we find that the net profit margin for this business is 23%.
This means that for every dollar of revenue generated, the company retains 23 cents as profit after covering expenses.

What Is a Good Net Profit Margin

There are a lot of specific circumstances that you need to consider when assessing whether your company’s net profit margin is objectively good.
Some of the main factors are your industry, business size and model, and competitive landscape.

That said, we pulled up some data from our product that could be helpful.

According to Xero Benchmarks for All Companies, a good net profit margin is around 10%.
But again, make sure to always consider the factors above since the number can vary widely based solely on the industry.
In the automobile industry, a 5-10% net profit margin might be considered good, whereas that same percentage is considered drastically low in SaaS where 15-30% is a better benchmark.

If you want to stay on top of future trends and be able to instantly compare your performance to companies just like yours (in any given industry), you can join our Benchmark Groups – it’s free for everyone!

How to Increase Net Profit Margin

By focusing on strategies to increase their net profit margin, companies can effectively optimize their profitability and strengthen their competitive position.

We shortlisted a few proven approaches to increasing net profit margin that the leading experts we spoke to over the years recommend:

  • Aim for a higher profit margin even if you’re new: Most startups settle for a lower profit margin at the beginning until they establish a market reputation. However, some experts believe that this gives you a “discounter” image, which can be hard to change over the years. If you’re funding your business through your own savings (as opposed to VC funds), aim for a higher profit margin, it can end up being the best position in the long run.
  • Use high-quality visuals: If you operate in an industry like ecommerce, don’t overlook the importance of your visuals. And this doesn’t mean taking a few quality shots and getting it over with. Use green lighting, 3D visuals, feature showcasing, or any other high-quality visual strategy that can boost more engagement, and ultimately more sales.
  • Align your pricing and marketing strategy: Pricing shouldn’t just be math, it also depends on your marketing strategy. Make sure to examine all aspects, not just product affordability. See what your clients are most likely to pay more money for – is it a unique service that comes along with the product, a last-minute discount, or a one-time bundle? Align your pricing and marketing strategy to influence how prospects perceive your brand and raise your net profit margin.

More resources to help you increase net profit margin:

Visualizations

  • Databox visualization

    Number

    Used to show a simple Metric or to draw attention to one key number.

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    Pie Chart

    Used to illustrate numerical proportions through the size of the slices.

  • Databox visualization

    Bar and Line Chart

    Used to show comparisons between values.

How to track Net Profit Margin in Databox?

Databox is a business analytics software that allows you to track and visualize your most important metrics from any data source in one centralized platform.

To track Net Profit Margin using Databox, follow these steps:

  1. 1
    Connect Xero that contains the metric you want to track
  2. 2
    Select the metric you want to track from the list of available metrics
  3. 3
    Drag and drop the selected metric onto your dashboard
  4. 4
    Watch your dashboard populate in seconds
  5. 5
    Put Net Profit Margin on the Performance screen
  6. 6
    Get Net Profit Margin performance daily with Scorecards or as a weekly digest
  7. 7
    Set Goals to track and improve performance of Net Profit Margin
Xero integration with Databox Track Net Profit Margin from Xero in Databox GET STARTED

Xero Net Profit Margin included in Dashboard Templates 1

  • Live view

    Xero Account Balance Overview

    Xero’s dashboard template provides you with insights about cash flow, bank accounts, sales and expenses entered in Xero to stay on top of your business.

    Xero

Basics

  • Description
    Net Profit Margin is a financial metric that represents the percentage of profits earned from revenue after all expenses, including taxes and interest, are subtracted.
  • Category
    Accounting
  • Subcategory
    Profit
  • Date Added
    2017-03-09
  • Default Format
    Percentage
  • Cumulative Support
    No
  • Units
    No
  • Granularities
    monthly, quarterly, yearly
  • Favorable Trend
    increasing
  • Historical Data
    Yes
  • Changing historical data
    Yes
  • Forecast Support
    Yes
  • Benchmark Support
    Yes
  • Media Support
    No
  • Dimension
    N/A
  • Metric Type
    general Learn more
  • API Endpoint
    https://api.xero.com/api.xro/2.0/reports/ExecutiveSummary

Questions? We've got answers.

  • Why Is the Net Profit Margin Important?

    Net profit margin is one of the most important financial metrics in any business because it provides a clear measure of profitability and financial health.

    Investors, analysts, shareholders, and lenders all use it to assess the company’s ability to convert revenue into profit.

  • Net profit margin vs. gross profit margin

    The gross profit margin represents the percentage of revenue remaining after deducting the cost of goods sold from the revenue. 

    On the other hand, the net profit margin considers all expenses, including operating expenses, taxes, and interest, in addition to the cost of goods sold.

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