The gross profit margin is used to look at how much profit a single product brings to your business, while the net profit margin is used to look at the overall profitability of your business.
Let’s take a look at how to measure gross profit margin. For example, if you sell a product for $50 and it costs you $35 to make, your gross profit margin is 30% ($15 divided by $50). While this metric is good to know, it’s not the one to use when evaluating your business’s profitability.
Now let’s take a look at how to calculate the net profit margin. Net profit margin looks at total sales, subtracts business expenses, and divides that figure by total revenue. For example, if your new business brought in $300,000 last year and had expenses of $250,000, your net profit margin is 16%.