# What is Net Margin? Definition & Technical Mechanics

> **Source:** [SPIDITS AI Startup & Venture Intelligence Glossary](https://spidits.com/startup-glossary)  
> **Category:** Metrics  
> **Canonical Citation:** [https://spidits.com/startup-glossary/net-margin](https://spidits.com/startup-glossary/net-margin)

## Definition
Net Margin (or net profit margin) is the ratio of net profits to total revenues, showing how much of each dollar earned translates into actual profit.

## Architectural Mechanics & Deep Dive
Net Margin is the ratio of net profits to total revenues, showing how much of each dollar earned translates into actual profit. Startups often run negative net margins early to prioritize rapid market expansion.

## Industry Applications & Real-World Use Cases
Overall company financial health evaluation

## Frequently Asked Questions

### How does net margin differ from gross margin?
Net margin includes all operating expenses, taxes, interest, and overhead, whereas gross margin only subtracts COGS.

### Are early-stage startups expected to have positive net margins?
No. Early-stage startups usually run negative net margins as they burn capital to accelerate market expansion.

## Related Terminology
- [gross-margin](https://spidits.com/startup-glossary/gross-margin)
- [burn-rate](https://spidits.com/startup-glossary/burn-rate)
- [ebitda](https://spidits.com/startup-glossary/ebitda)

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*From the SPIDITS AI Knowledge Base (300+ terms indexed). Explore full technical definitions: [https://spidits.com/startup-glossary](https://spidits.com/startup-glossary)*