Profit Margin

Profit margin is a core profitability measure that expresses the earnings from a sale as a percentage of the selling price. In its simplest form, it is the difference between the selling price and the cost, divided by the selling price. Retailers commonly use two versions: gross profit margin (which subtracts only the cost of goods from the selling price) and net profit margin (which also accounts for all operating costs such as rent, staff and waste).

Profit margin matters because high revenue does not always mean high earnings; what really counts is how much stays with you after each sale. Pricing and discount decisions made without knowing your margin can push a business into loss. For example, a store that buys an item for 50 and sells it for 80 works at a (80-50)/80 = 37.5% gross profit margin. Once waste, payment terms and operating costs are added, the net margin comes out lower. Tracking margin product by product lets you decide where to focus based on data rather than guesswork. Welda Stock matches purchase and sales prices to calculate each product's margin automatically; compared with tracking inventory in Excel, it keeps this process accurate and up to date.