Glossary term
What is Net margin?
Short answer
Net margin is the share of total revenue kept as profit after every cost of running the business, including overhead, has been paid.
Net margin, explained for tree service owners
Net margin shows how much of your total revenue is left as profit after all costs are paid. Those costs include job costs, office expenses, insurance, vehicle payments and any pay you take for yourself. To calculate it, subtract all costs from revenue, divide by revenue, then multiply by 100. For a tree service owner, net margin is the number that tells you whether the business is really healthy. A busy year can still have a thin net margin if overhead is high or jobs run long. Review it each month and compare it with your gross margin to see where money leaks out.
Related terms
- Gross margin
Gross margin is the share of revenue left after paying direct job costs, such as crew labor, equipment, fuel and disposal, but before…
- Overhead
Overhead is the ongoing cost of running a business that is not tied to one job, such as insurance, office costs, phone plans, software…
- Break-even price
Break-even price is the lowest price for a job that covers all of its costs with no profit left over, found by adding direct costs and a…
- Insurance premium
An insurance premium is the price you pay, monthly or yearly, to keep an insurance policy active.
- Markup
Markup is the amount added to a job's direct cost to set its selling price, usually shown as a percentage of cost, such as 40 percent…
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