# Operating Profit Margin

## Quick Definition

The percentage of revenue remaining after deducting operating expenses, showing profitability from core business operations.

## What is Operating Profit Margin?

Operating margin measures profitability from regular business operations before interest and taxes. It reveals how efficiently management runs the company and controls operating costs.

## Operating Margin Significance

This metric isolates operational efficiency from financing decisions and tax strategies. Investors use it to evaluate management performance independent of capital structure.

## Improving Operating Margin

Increase revenue while holding costs flat, automate processes, renegotiate vendor contracts, eliminate waste, or improve employee productivity. Model the impact of these changes with our [pro forma income statement generator](/content/proforma-income-statement-generator/index.html) to see how cost reductions flow through to your bottom line.

## Formula

Operating Profit = Gross Profit - Operating Expenses  
Operating Margin = (Operating Profit / Revenue) × 100  
  
Operating Expenses include: salaries, rent, marketing, R&D, G&A

## Example

SaaS company quarterly results:

- Revenue: $400,000
- Gross Profit: $320,000 (80%)
- Sales & Marketing: $120,000
- R&D: $80,000
- G&A: $60,000

Operating Expenses = $260,000

Operating Profit = $320K - $260K = $60,000

Operating Margin = $60K / $400K = 15%

## Related Terms

[**Net Profit Margin** \  
\  
The percentage of revenue remaining as profit after all expenses, taxes, and interest are paid.\  
\  
Learn more](/content/terms/net-profit-margin/index.html)

[**Gross Profit Margin** \  
\  
The percentage of revenue remaining after subtracting the direct costs of producing goods or services sold.\  
\  
Learn more](/content/terms/gross-profit-margin/index.html)

[**EBITDA** \  
\  
Earnings Before Interest, Taxes, Depreciation, and Amortization, a measure of operational profitability excluding financing and accounting effects.\  
\  
Learn more](/content/terms/ebitda/index.html)

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