How to calculate profit
Profit is total revenue minus total costs; for a seller it is easiest to work down from revenue in three steps.
| Step | Calculation | Example |
|---|---|---|
| Gross profit | Revenue − cost of goods | $14,000 − $4,800 = $9,200 |
| Contribution | Gross profit − fees − shipping | $9,200 − $1,980 − $2,200 = $5,020 |
| Net profit | Contribution − fixed costs | $5,020 − $1,800 = $3,220 |
This is the same order a sole proprietor reports on Schedule C: gross receipts, less cost of goods sold, gives gross profit, and expenses are subtracted from that to reach net profit.[1][2]
Profit at different sales volumes
Because overhead stays the same, profit grows faster than sales: each extra unit here adds $12.55 once its own costs are paid.[3]
| Units | Revenue | Contribution | Net profit | Net margin |
|---|---|---|---|---|
| 200 | $7,000 | $2,510 | $710 | 10.1% |
| 300 | $10,500 | $3,765 | $1,965 | 18.7% |
| 400 | $14,000 | $5,020 | $3,220 | 23.0% |
| 600 | $21,000 | $7,530 | $5,730 | 27.3% |
This shop needs to sell 144 units a month just to cover its $1,800 of fixed costs. The break-even calculator charts that point.
Profit per unit and per order
Profit per unit is net profit divided by units sold, $8.05 here; it is lower than the $23.00 gap between price and cost because fees, shipping and overhead are spread across every unit. To see the fees on one sale for a specific platform, use the eBay fee calculator, the Etsy fee calculator or the Amazon FBA calculator, then enter their total as a percentage here.
Common profit mistakes
- Counting revenue that includes sales tax. Sales tax you collect belongs to the state; leave it out of the price.
- Ignoring returns. Subtract refunded sales and any return shipping you pay.
- Forgetting your own time. A profit that pays you nothing for the hours worked is not the same as a profitable business; the hourly rate calculator prices your time.
- Confusing profit with cash. Inventory bought this month is spent cash but only becomes cost of goods when it sells.
For one item instead of a period, the profit margin calculator is quicker.
Frequently asked questions
How do I calculate profit?
Subtract all costs from revenue: cost of the goods sold, selling fees and shipping, and fixed overhead for the period.
What is the difference between gross profit and net profit?
Gross profit subtracts only the cost of goods sold. Net profit also subtracts selling costs, overhead, interest and taxes.
How do I calculate profit per unit?
Divide net profit by the number of units sold: $3,220 ÷ 400 = $8.05.
Should shipping charged to buyers count as revenue?
Yes. If buyers pay for shipping, add it to the price per unit and keep the label cost in the shipping field, so both sides are counted.
What profit margin should I aim for?
It depends on your industry and costs. Compare your net margin with similar businesses; the profit margin guide on this site has benchmark tables.