Finance and valuation
Profit margin
Profit margin is the share of revenue left after all expenses, found by dividing profit by revenue and shown as a percentage.
The SBA's glossary gives the basic profit formula: revenues minus expenses equals net income or loss. Profit margin then divides that result by revenue, so a practice that keeps 20 dollars of profit from each 100 dollars of revenue has a 20 percent margin. The SBA glossary also defines gross profit margin as gross profit divided by net sales, the share of each sales dollar left after paying for the product. In a dental practice the margin depends on how the owner's own pay is counted, which is why two practices may not compare fairly. See owner compensation and practice profitability. The profit and loss statement is where the figures come from.