Net Profit
Net profit is the money remaining after subtracting all business costs from total revenue. It is the fundamental measure of whether a business is making or losing money.
What is Net Profit?
Net profit (also called the 'bottom line') is calculated as Revenue − Total Expenses. Total expenses for an ecommerce business include cost of goods sold, fulfilment costs, marketplace fees, advertising spend, SaaS subscriptions, contractor and staff wages, returns and refunds, and any other operational costs. The resulting figure is what the business actually earns — the money available to pay the owner, reinvest in growth, or save.
Net profit is distinct from cash flow. A business can be profitable on paper (net profit positive) but cash-flow negative if inventory investment and accounts payable outpace incoming cash. Conversely, a business with strong cash flow from high sales volume may show negative net profit if COGS and advertising costs exceed revenue.
For ecommerce sellers, calculating true net profit requires including often-forgotten costs: Amazon subscription fees ($39.99/month), return processing fees, inbound freight costs amortised across units sold, storage fees, and the cost of inventory that doesn't sell. Sellers who exclude these often believe they're more profitable than they are.
Why it matters for sellers
Net profit is reality. Revenue is vanity, gross margin is interesting, but net profit is what you actually take home. Many sellers operate for years believing they're profitable based on gross margin calculations, then discover their true net profit is 3–5% when all costs are included. At that margin, any COGS increase, fee change, or advertising cost spike turns the business negative.
How to use Net Profit
Build a monthly P&L from day one. Use A2X (for Amazon) or Bench.co to automatically categorise Amazon payouts into revenue, fees, and refunds. Connect to Xero or QuickBooks for full accounting. Review net profit monthly — not quarterly. Small margin erosions compound quickly; catching them monthly allows correction before they become existential.
Calculate net profit per SKU rather than just at the portfolio level. A blended 15% net margin might mask one product at 35% subsidising another at -8%. Discontinue loss-making SKUs unless they serve a strategic purpose (e.g., traffic driver to higher-margin bundles).
Real-world example
An Amazon seller uses Sellerboard to calculate true per-unit net profit for the first time. Their 'star product' generating $120,000 revenue shows $14,400 net profit (12%) — but only after including return processing ($3,600), storage fees ($2,800), and their VA's time proportionally allocated ($4,200). Before this analysis, they estimated 22% net margin based on COGS and FBA fees alone.
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Frequently asked questions about Net Profit
What is the difference between gross profit and net profit?
Gross profit = Revenue − COGS only. Net profit = Revenue − all costs (COGS + fulfilment + advertising + fees + overheads). Gross profit tells you how efficiently you're manufacturing and sourcing; net profit tells you whether the full business is viable.
What tools calculate net profit for Amazon sellers?
Sellerboard and Fetcher are the most popular P&L tools built specifically for Amazon sellers — they pull data directly from Seller Central. A2X exports Amazon settlement data to QuickBooks or Xero in proper accounting format. SellerApp and Helium 10 Profits include net profit dashboards. For Shopify, BeProfit and TrueProfit offer per-order profit calculation including ad attribution.
Is 10% net profit margin good for ecommerce?
10% is viable but fragile for physical goods ecommerce — there's very little buffer for cost increases or market shifts. 15–20% is healthy; above 25% is excellent. Below 10%, any headwind (freight cost spike, CPC increase, or competitor entry) risks turning the business unprofitable.