Profit margin

According to Investopedia:

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Profit margins are financial metrics that are used to measure a business or company's profitability. A gross profit margin can be used to determine a particular item's profitability, but net profit margins are a better measure of overall profitability. The net profit margin is key as it measures total sales, less any business expenses, and then divides that number by total revenue. The best net profit margin for your business depends on what industry you're business is in, which means you shouldn't compare your margins to companies in other industries.

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Low, medium and high profit margins for a business

Brex Incorporated, an American financial service and technology company, indicates:

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An NYU report on U.S. margins revealed the average net profit margin is 7.71% across different industries. But that doesn’t mean your ideal profit margin will align with this number. As a rule of thumb, 5% is a low margin, 10% is a healthy margin, and 20% is a high margin. But a one-size-fits-all approach isn’t the best way to set goals for your business profitability. First, some companies are inherently high-margin or low-margin ventures. For instance, grocery stores and retailers are low-margin. They have high expenses, as they need to purchase inventory, employ corporate employees and labor workers, facilitate shipping and distribution, and rent bigger facilities as their sales grow. But low-margin goods, like food and some consumer products, are usually easier to sell. A highly competitive market, like the rideshare war between Uber and Lyft, can also create thin margins. By contrast, businesses like consulting firms and software-as-a-service (SaaS) companies generally have high gross margins. These businesses have fewer operating costs, no inventory, and require less startup capital to launch. Companies that sell high-dollar products, like jewelry stores, can also fall into this category.

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