Profit Analytics Blog
Read expert articles with insights about e-commerce profitability from analyzing thousands of e-commerce businesses' data.
Profit calculationGross Profit vs. Gross Margin: How Do They Differ?Thinking of starting your own small business or looking at improving your current small business's profitability? Getting to know and understand the key difference between gross profit and gross margin will help you assess your profitability more accurately.
The simple fact is that gross profit and gross margin may be closely related, but they differ from themselves in terms of what they measure as much as they differ from net and operating profit margins. Read on to learn more or check out this guide which covers how to calculate net profit margin and much more.
What Is Gross Profit?
Your gross profit is the total amount of profit that your company makes on the sale of a product. In other words, it is the amount you have left over after you have covered your direct production costs. Let's look at a simple example:
Net sales revenue – COGS (cost of goods sold) = gross profit
You are a baker. You sell a wedding cake for $50 (net sales revenue). The cost of the ingredients equals $25 (COGS). Your gross profit is equal to $25.
Your net sales revenue is the total amount you generated from your sales over a period. Net sales includes the deductions you need to make as a result of goods that have been returned, as well as discounts you have received from your suppliers. It is often referred to as your "top line" because you'll find this amount on the top line of your income statement. Once your costs have been deducted from your revenue, you get your net income—also referred to as your "bottom line."
The COGS (cost of goods sold) refers to your direct costs for producing your products. Some examples of COGS include the materials used, such as the ingredients for your wedding cake and the labor costs for mixing ingredients and icing it.
» Discover how you can calculate gross profit percentage
What Is Gross Margin?
Your gross margin is calculated as a percentage of how much your sales revenue exceeds the total cost of making the sale. Let's look at another practical example:
Gross profit / net sales revenue x 100
Your wedding cake's gross profit is $25. In this simple example, your net sales revenue is $50. Therefore, your gross margin is $25 / $50 x 100 = 50%
» Check out our guide on how to calculate net profit margin or simply book a demo with BeProfit
Which Should You Use?
The short answer? You should use both of these financial metrics. Since gross profit and gross margin are not the same calculations and measurements, they will tell you two slightly different but equally important stories about your business.
Gross profit gives you a basic idea of how much your business makes, while gross margin digs a little deeper. Your gross margin will tell you how well your company is generating revenue compared to your production costs for both products and services. The higher your percentage margin, the more effective your company is at managing the generation of revenue for each dollar you spend. It also makes it easier for you to compare your business to competitors, whether local or international. You can then track and benchmark your gross margin against other companies over a longer period to pick up on trends within your specific industry.
The two terms may have similarities but understanding their differences is what could make a difference to your bottom line.
Profit calculationNet, Gross, & Operating Profit Margins: What Is High?Two popular metrics commonly used to gauge the success of a business are profit margin and net profit. And, while net profit is great at reflecting how much profit is generated from revenue, for some applications, it's arguable that a business's profit margin is a more valuable metric. This is because profit margin allows you to gauge how efficiently your business is running overall.
Understanding these metrics—involving income, revenue, and profit—and the benchmarks of each of these can provide insight into a business's overall profitability.
» Book a demo with BeProfit and learn how to calculate profit and other metrics with just one tool
Difference Between Net, Gross, & Operating Profit Margins
These three metrics are commonly used to analyze and measure the income of a business. All three metrics differ based on industry and business size and are typically not stagnant. To help you better understand the differences between the three margins, consider learning more about:
1. How to Calculate Net Profit Margin
Net profit margin is a measure of profitability. It's calculated by determining a business's net profit as a percentage of revenue.
Net Profit Margin = [(Revenue - Cost) / Revenue] x 100
For example, in e-commerce, the average net profit margin is 0.64%, whereas the average total market net profit margin is 7.77%, as reported by NYU Stern School of Business. But this can fluctuate depending on a number of factors, such as the number of sales, merchandising costs, and product prices.
Another way to look at net profit margin is by using a net profit margin ratio. The net profit margin ratio is just another way to measure a company's profitability.
Net Profit Margin Ratio = Net Income / Revenue
This ratio tells you how much profit a company makes on each dollar of sales. Simply put, a high net profit margin ratio means that the company is making a lot of money on its sales. In contrast, a low net profit margin ratio means that the company is not making as much money on its sales.
2. How to Calculate Gross Profit Margin
The gross profit margin differs from the gross profit and is expressed as a percentage. Gross profit margin is the percentage of revenue that remains after paying the cost of goods sold (COGS). The average, per NYU Stern School of Business, sits around 33% for all industries, and 42.78% for e-commerce, particularly.
Gross Profit Margin = [(Revenue - COGS) / Revenue] x 100
This calculation is useful because it measures the efficiency of the business's operations, provides a benchmark for measuring other business expenses, and shows changes in gross profit margins over time. Thus, e-commerce businesses prove to be excelling at managing operational costs efficiently for a maximal gross profit margin.
If you find your gross profit margin is low, however, you can look into reducing COGS, including lowering shipping costs or cutting out unnecessary expenses like excess staff or unneeded operational costs.
» Need help managing expenses? Keep track of your e-commerce business expenses
3. How to Calculate Operating Profit Margin
Operating profit margin (or return on sales) is the ratio of operating income to net sales. This is usually expressed as a percentage.
Operating Profit Margin = (Operating Profit / Revenue) x 100
The operating profit margin ratio is used to determine how well a company can cover operating costs with revenues. In other words, how effective a company is at generating profits from its sales. This is a useful performance indicator when making comparisons to similar companies. The average total market operating profit margin is 13.52%, with the e-commerce industry at 5.85%. This can change drastically based on net sales or even streamlining operational processes to lower costs.
» Find out how to calculate gross profit percentage
Easily Track and Analyze Your Profits
View and manage your profit trends on one dashboard.
Provides a complete business and financial overview.Access to real-time data and custom reports.Link multiple platforms and shops for an aggregated view.
BeProfit's app makes it simple to track and analyze your profit margins, saving you time and effort.
Benefits of Knowing Your Profit Margins
The ultimate goal for a business is profitability. If your sales are up, but your margins are down, you may need to take a deeper look at how you're running your business.
A business with a good profit margin is able to remain afloat during tough times and capitalize on opportunities, such as seasonal marketing strategies, to help boost sales. A high-profit margin means that the company is making enough money on each sale to cover its costs and generate a positive return on investment (ROI) for continued growth.
A high-profit margin also sends a positive signal to potential investors, lending credibility and stability to the business.
» Learn about effective cost leadership strategies to help improve profitability
Limitations of Profit Margin Calculations
To calculate a profit margin, business owners need to calculate total revenue and total expenses. This can be complex. Research and development (R&D) costs are expensed in the year in which they occur, while depreciation expenses are spread out over the life of the asset.
Profit margins also don't always consider changes in sales volume. If a company doubles its sales volume but keeps costs constant, the profit margin doesn't change. If a company reduces its sales but also lowers expenses and increases prices, its profit margin will increase. Calculating profit margins is not an exact science, and the outputs, while helpful, should be considered an estimation.
» Discover how to perform a profitability analysis for your e-commerce store
Knowing These Margins Can Help Improve Profitability
Because margins can fluctuate and depend on a number of factors, knowing the benchmark values can provide an estimated guideline to assess your business. Ultimately, a good profit margin is essential for maximizing company growth, understanding how other successful businesses in your industry are performing, and achieving optimizing your processes. If you have low-profit margins, tracking these same metrics on all-in-one platforms, like BeProfit's, can offer useful insight for making sales strategy adjustments, operational optimizations, and improving revenue management.
Profit calculation3 Best Excel Formulas for Calculating Markup vs. MarginAccording to the NYU Stern School of Business, the average gross profit margin across all industries is 36.28%, with online retailers generating an average gross profit of 42.78%. How does yours compare?
As an e-commerce entrepreneur, knowing your profit margin and focusing on the factors that influence your profits and contribute to a robust bottom line is crucial. Grasping the concepts of margin and markup is a key component of this process, and thankfully, Excel makes calculating these vital metrics a breeze!
In this post, we'll delve into the top Excel formulas for determining markup and margin and how you can leverage them to make informed pricing decisions and boost your profitability.
Understanding the Difference Between Markup and Margin
Markup
Markup refers to the amount you charge above the cost to cover expenses and generate a profit.
In the marketplace, markup is expressed as a percentage, that is, the percentage added to the cost of a product or service to determine its selling price. To work out your markup, you need to accurately calculate the cost of goods sold (COGS).
Margin
Margin represents the portion of each sale that contributes to covering expenses and generating profit.
We also express margin as a percentage: the percentage difference between the selling price and the cost expressed as a percentage of the selling price. So, in summary:
Markup is the percentage increase in price over the cost of the productMargin is the profit made as a percentage of the selling price
Below are three key pairs of Excel formulas you can use to calculate your markup and margin.
» Learn more about the differences between gross margin & gross profit so you don't get them confused
1. Basic Percentage Formula
To gain a better insight into a company's pricing strategy and make informed decisions on pricing and sales, we can use two basic formulas that apply to markup and margin.
Markup Calculation Formula
Markup = [(Selling Price - Cost) / Cost] x 100
For example, if a T-shirt costs $23 to produce and the company wants to sell it at a price of $30, the necessary markup would be [($30 - $23) / $23] x 100. This works out to be a markup of 30.43%.
To calculate this in Excel, enter the cost and selling price in separate cells, such as A2 and B2. In cell C2, input the formula:
=(B2-A2)/A2*100
Alternatively, enter the formula =(B2-A2)/A2 and select "Percentage" from the dropdown list in the "Number" field in the top menu. This automatically expresses the value as a percentage.
» Simplify calculations and optimize profits. Book a demo for BeProfit's profit-tracking app
Margin Calculation Formula
Margin = [(Selling Price - Cost) / Selling Price] x 100
Using the same example as above, your calculation would be [($30 - $23) / $30] x 100. The gross margin, therefore, works out to be 23.33%.
As with the markup formula, input the cost and selling price in separate cells, such as A2 and B2. In cell C2, enter the formula:
=(B2-A2)/B2*100
Or you can enter the formula =(B2-A2)/A2 and select "Percentage" in the "Number" field in the top menu.
2. Sales Price Formula
Considering both the cost of producing the product and the desired profit margin is something businesses must do when setting a sales price. Sale prices are another key factor in margin and markup calculations.
Sales Price Using Markup
To calculate the sales price with the desired markup in mind, use this formula:
Sales Price = [1 + (Markup/100) x Cost Price]
Using the same figures are the previous examples, the sales price = [1 + (30.43/100) x 23]. This means your sales price should be $30.
An Excel formula is a much quicker way to calculate the sales price. If you enter the cost price in the cell A2 and the markup in cell C2, the formula you would enter in cell B2 is:
=(1+C2)*A2
Make sure that for B2, you select "Number" from the dropdown list from the top menu, as you can see below:
Sales Price Using Margin
To determine the sales price using the profit margin, use this formula:
Sales Price = Cost Price / [1 - (Margin Percentage/100)]
For example, if you want to achieve a margin of 23.33% on the T-shirt that costs $23, your sales price = $23 / [1 - (23.33/100)]. This works out to be $30.
For a simpler way to calculate the sales price, you can use this formula in Excel:
=A2/(1-C2)
Again, be sure to select "Number" from the dropdown list for cell B2, as you can see below:
By using these sales price formulas, businesses can ensure that they're setting prices that will result in the desired profit margins.
3. Discount Formula
Another common strategy businesses use is discounts to attract customers and increase sales. When it comes to margin and markup calculations, discounts can affect profit margins. If a company offers a discount on a product, the sales price will decrease, which may impact the margin percentage.
Firstly, if you have a discount percentage in mind, you need to calculate what the new discounted sales price will be. To do that, use this formula:
Discounted Sales Price = Selling price x [1 - (Discount Percentage/100)]
To illustrate with our same example, to work out the discounted sales price for our T-shirt with a 10% discount, the calculation would be: discounted sales price = $30 x [1 - (10/100)]. This works out to be $27.
To calculate this in Excel, enter the sales price in cell A2 and the discount percentage in cell B2. Then input this formula in cell C2:
=A2*(1-B2)
Remember to select "Percentage" from the dropdown list for cell B2 and use "Number" for cells A2 and C2.
Once you have this amount, you can work out your new markup and margin values. Use the basic percentage formulas, but replace the original selling price with the discounted sales price you just calculated.
This means the new markup formula will be:
New Markup = [(Discounted Sales Price - Cost) / Cost] x 100
Using our example, the new markup after the discount = [($27 - $23) / 23] x 100. This comes to 17.39%.
The formula to calculate the new margin will be:
New Margin = [(Discounted Sales Price - Cost) / Discounted Sales Price] x 100
Using our example, the new margin = [($27 - $23) / $27] x 100. This works out to 14.81%.
You can use the same basic percentage formulas in Excel, but just make sure you replace the selling price in cell B2 with the discounted sales price. In other words, replace $30 with $27.
By calculating the new markup and margin after applying a discount, you can better understand the impact of the discount on your profits. This will help you make informed decisions about whether or not to offer a discount and how to adjust your pricing strategy to maintain profitability.
» Looking for more help with discounts? Check out more easy Excel discount formulas
Factors That Can Impact Markup and Margin
We already established that markup and margin are key metrics that impact businesses and their profitability. However, several factors can impact these metrics, including competition, market demand, production costs, and pricing strategies.
In highly competitive markets, businesses may need to lower their prices to remain competitive, which can impact both markup and margin. Production costs, including raw materials, labor, and overhead, can also impact markup and margin. Finally, different pricing strategies can impact these metrics, as businesses may need to adjust their prices to reflect changes in their overall pricing strategy.
» Remember to keep your pricing strategy flexible. Learn how with dynamic pricing
Calculate Markup and Margin in Excel for Effective Pricing
In today's competitive market, it's crucial to calculate markup and margin accurately to ensure profitability and sustainability. Using the above formulas in Excel is a simpler, more time-efficient, and more accurate way to calculate these key metrics. By using Excel to calculate markup and margin, businesses can make informed decisions about pricing that will ensure customer satisfaction and boost customer lifetime value (CLV) while still maintaining profitability.
Once you have effective pricing in place, it's essential that you continually monitor, track, and analyze your profits and expenses. BeProfit is one of Shopify's best profit calculators to get the job done. It's an all-in-one analytics tool that auto-syncs your order and expense data to provide real-time product, order, marketing, and expense reports. With a clear overview of your business finances, you can make informed and strategic decisions to scale your store and boost your bottom line.
Profit calculation4 Easy Excel Discount Formulas For Your E-Commerce StoreDiscounts can sometimes make or break a sale. 83% of shoppers say that discount coupons inform their purchasing behavior directly. However, discounts need to be implemented strategically. With monitoring, businesses can calculate optimal discounts, as well as forecast ROI and profits. And Excel can be a powerful and flexible tool to help with this. Excel can streamline and optimize e-commerce operations, allowing businesses to make better-informed decisions and achieve greater success.
1. Discount Price Using Manual Formula
Calculating discount prices using manual formulas in Excel is a simple and efficient way to manage your pricing strategy to help ensure profits.
Let's say you want to offer a 20% discount on a product that originally costs $100.
Here's how you can calculate the discounted price using a manual formula:
1. Enter the original product price ($100) in cell A2.
2. Enter the discount rate as a decimal (0.2) in cell B2.
3. In cell C2, enter the following formula:
Discounted Price = Product Price - (Product Price x Discount Price)C2=A2-(A2*B2)
4. Excel will calculate the discounted price, which is $80 in this case.
You can easily adjust this formula for different products and discount rates.
Monitor Your Sales Performance
With your discounts in place, you can track profit and revenue metrics to find whether your pricing leads to conversions.
View data from mobile or desktop devices.Connect multiple shops for an integrated view of your business's revenue metrics.Create and export customized data reports.
With BeProfit, you can monitor your conversion rates and profits, which can help you spot when product discounts are working for your business.
2. Manual Formula to Calculate Discount Rate
To calculate a discount rate in Excel, you would typically need the optimal price you're hoping to sell the product for first. For example:
1. Enter the original product price ($100) in cell A2.
2. Put in the target discounted price ($50) in cell B2.
3. In cell C2, enter the following formula:
Discount Rate = (Product Price - Target Discounted Price) / Product PriceC2=(A2-B2)/A2
4. Excel will calculate the discount percentage required to achieve the target discounted price. In this example, this would be 50%.
Make sure you format cell C2 as a percentage. You can change this from the "Home" tab in the "Number" section, and select "Percentage" from the drop-down box.
If you'd like to decrease the decimal points so your percentage is rounded to a whole number, you can click on "Decrease Decimal" from the same section.
» Find out how to calculate revenue in Excel using simple formula templates
3. Using Array Formula to Calculate Discount Price
Array formulas in Excel can help you quickly calculate discounted prices for large sets of data.
For example, you have a dataset with 10 products and you want to calculate the discounted price for each product based on its original price and discount rate.
Here's how you can use an array formula:
1. Enter the original product prices in column A.
2. Enter the discount rates as decimals in column B.
4. In column C, enter the following formula:
Discounted Price = Product Price - (Product Price x Discount Rate)C2=A2-(A2*B2)
5. To apply the formula to the other rows, press Ctrl+Shift+Enter. Excel will automatically calculate the discounted price for each product based on its original price and discount rate.
» Discover the 3 best Excel formulas for calculating markup vs margin
4. Find the Discount Rate With the What-If Analysis
Excel's What-If Analysis function is a bit more involved. But it can help you determine the required discount rate to achieve your desired discounted price.
For instance, let's say you have a product with an original price of $100 and a current discount price of $50, and you want to offer it at a final discounted price of $75.
1. Begin by entering the original price of the product ($100) in cell A2, the current discount rate (50%) in B2, and use the manual formula from the first method to get the current discounted price in cell C2.
2. Next, navigate to the Data tab on the Excel ribbon and click on "What-If Analysis."
Tip: Make sure the cell selected before you click on "What-If Analysis" is C2 (the "Discounted Price" cell)
3. From the drop-down menu, choose "Goal Seek."
5. In the "Goal Seek" dialog box, you will see that "Set cell" is auto-filled with C2. Now:
Fill in "75" in the "To value" field since this is your desired discounted price.Click into the "By changing cell" field, then click on cell B2 to select that value.
6. After clicking OK, Excel will automatically compute the required discount rate to achieve the target discounted price of $75. In this case, a 25% discount rate should be used.
Employing the What-If Analysis function can be a great tool to test different pricing strategies and discounts before implementing them, so you can help boost sales and ensure your final amounts will still convert into revenue and profits.
» Need help? See how to increase e-commerce store revenue with customer discounts
Deduce Your E-Commerce Store's Discounts With Ease
By using Excel to deduce your e-commerce store's discounts, you can take the guesswork out of pricing. This can help you increase profit margins, boost customer satisfaction with competitive pricing, and potentially improve AOV.
But monitoring your pricing effectiveness is also vital. You can use platforms like BeProfit for seamless profit and revenue tracking, so you can have a clear overview of the impact and performance of your discounts and pricing.
Profit calculationHow to Calculate Revenue in Excel (Simple Formulas + Templates)Every seasoned business owner knows the value of revenue calculation as it helps them assess their profit, perform financial analysis, and do forecasting. So, how is sales revenue calculated? This article offers start-ups and established businesses alike straightforward Excel revenue calculation templates.
» Book a demo with BeProfit to learn more about the advantages of our revenue calculation solutions
5 Types of Revenue and Their Exemplified Calculations
This post will address the following revenue categories and provide a revenue formula in Excel for each:
Incremental revenueAverage revenueGross revenueQuarterly revenueMarginal revenue
Calculate Your Revenue Effectively
Save time and effort by having your revenue calculated automatically.
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1. Incremental Revenue
Incremental revenue is the profit a business receives from a certain increase in sales. This can refer to the additional revenue received from releasing a new product or service or trying new marketing strategies.
Therefore, the original revenue that would have been generated before the additional product or service was introduced in that period must be subtracted from the adjusted revenue that includes the new product or service.
Formula
A formula can therefore be constructed as follows:
Incremental Revenue = Adjusted Revenue - Original Revenue
Adjusted Revenue = adjusted number of units sold x adjusted selling priceOriginal Revenue = original number of units sold x original selling price
When using Excel, the calculation can be set up as follows:
Original Revenue and Adjusted Revenue are listed separately.Incremental Revenue is calculated by subtracting the totals (=D3-D2).
» Delve deeper into the differences between incremental cost vs marginal cost
2. Average Revenue
Average revenue is earned for each unit, product, or service you sell. People also refer to it as average revenue per unit or per user (ARPU).
Formula
Average revenue is calculated by dividing the total revenue by the quantity sold:
Average Revenue = Total Revenue / Quantity Sold
So, if a company's total revenue is $5 000 and the quantity sold is 1 000, then the average revenue per unit is $5 000 ÷ 1 000 = $5.
In Excel, the calculation can be set up as follows:
Total Revenue and total quantity sold are listed separately.Average revenue is calculated by dividing the totals (=B2/B3).
» Find out how to track your revenue like the e-commerce giants
3. Gross Revenue
Your gross revenue is the total amount of money your company makes before expenses are deducted. This includes the sale of shares, property, and equipment, as well as interest and exchange rates.
Knowing your gross revenue will help you analyze your financial statements, track your sales volumes, and identify high-impact revenue channels to understand how well your business is doing.
Formula
There are two types of gross revenue: product revenue and service revenue.
Product Revenue = Number of units sold x Average price
Service Revenue = Number of customers x Average price of service
In Excel, the calculation can be set up as follows:
Products and services are listed separately.Quantities sold, prices, and any discounts provided are used to calculate the final total selling price of each product and service.Total gross revenue is calculated by adding the final totals of products and services (=E5+E11).
» Explore the difference between gross profit vs gross margin for more insights
4. Quarterly Revenue
Quarterly revenue measures the increase in your sales from one quarter to the next. You would use it to review the sales of successive quarterly periods or compare the sales of the same quarter in different years.
It's important to note that quarterly revenue can be influenced by seasonal sales. For example, if the Olympics is hosted in a certain country, it may skew quarterly results and give you an inaccurate view of your company's quarterly revenue.
Formula
You can calculate quarterly revenue growth as follows:
[(Q2 - Q1) / Q1] x 100
In Excel, the calculation can be set up as follows:
Q1 and Q2 sales are listed separately with their relevant sales information (units sold, prices, and totals).The formula is applied at the bottom before it's converted to a percentage in the next row.
» Learn the 3 best Excel formulas for calculating markup vs margin
5. Marginal Revenue
Marginal revenue is the increase in revenue that you get from the sale of each extra unit of output. While marginal revenue can stay constant over a specific output level, it follows the law of diminishing returns and will eventually slow down as your output level increases.
As a business owner, you can use historical marginal revenue data to analyze customer demand for your products and determine your most efficient and effective prices. Finally, this calculation helps you understand your forecasts because it determines future production planning and schedules.
Formula
This is the formula you can use to calculate your marginal revenue:
Change in Revenue / Change in Quantity=(Total Revenue - Old Revenue) / (Total Quantity - Old Quantity)
Let's look at a quick example:
Your company sells its first 100 products for $1 000, so that's a selling price of $10. You sell the next products for $8. This means that your marginal revenue for product number 101 is $8.
It's important to note that marginal revenue disregards the previous average price of $10. This is because it only analyzes incremental change. If you sell 115 units for $1 100, your marginal revenue for products 101 through 115 is $100, or $6.67 per unit.
In Excel, the calculation can be set up as follows:
The periods you're comparing are listed separately. In this case, it's simply indicated as "previous year" and "this year".Marginal revenue is calculated by applying the formula [=(D3-B3)/(C3-A3)].
» Learn more about the revenue vs product revenue discrepancy in GA4
Save Time With Precise Tools
There are profit calculation mistakes to avoid if you use the formulas and spreadsheets provided in this article. If you're not confident about how to calculate monthly revenue in Excel on your own, using the Profit Analysis Dashboard by BeProfit can save you time while ensuring your results are accurate.
Once the revenue has been calculated, the next step is to analyze and measure it using metrics such as net, gross, and operating profit margins. Knowing how to calculate net profit margins is essential because it provides insight into how effectively your business is running overall.
» Want to know how profitable your store is? Learn how to perform an e-commerce profitability analysis
Profit calculationBest Profit Calculators for AmazonA profit calculator is a handy tool to help business owners and entrepreneurs track their profits and losses. By inputting data about their income and expenses, a profit calculator can provide users with an estimate of how much money they are making (or losing) on a particular venture.
Why Do You Need a Profit Calculator for Amazon?
When selling items on Amazon, it is essential to understand how much profit you are making in total and on each sale. This is where a profit calculator for Amazon comes in handy. With this tool, you can enter the information about the items you are selling, such as the cost price and the sales price, to determine how much profit you are making on each item.
This information can be helpful when it comes to making decisions about what items to sell and how many of them to sell. Additionally, it can help you understand which items are your most profitable and track your progress. If you are looking for ways to increase your profits, using a profit calculator for Amazon can be a great place to start.
Best Profit Calculators for Amazon
If you are an Amazon seller, then you know that profit is key. However, calculating your profits can be tricky, especially if you are not familiar with all the ins and outs of Amazon’s selling platform. That’s where a profit calculator comes in handy.
1. BeProfit
The BeProfit Profit Calculator is an Amazon tool that allows you to measure the profitability of products on Amazon by considering factors such as product costs, shipping costs, and Amazon fees. The calculator is simple to use: just enter the product information, and it will provide you with an estimate of your profits.
Provides a complete business and financial overview.Access to real-time data and custom reports.Link multiple platforms and shops for an aggregated view.
This handy tool can help you determine whether a product is worth selling on Amazon. It can also help you decide which products are most profitable so that you can focus your efforts. The BeProfit Profit Calculator makes it easy to calculate your profits and make informed decisions about your Amazon business.
» Learn how to track and calculate your profit on Amazon FBA
2. Feedvisor
Feedvisor offers an Amazon profit calculator that makes it easy to keep track of your business' bottom line.
The calculator considers several factors, including shipping costs and sales tax, while also serving as an Amazon FBA calculator. It also allows you to perform a profitability analysis to compare past months or years to see if your business is trending up or down. Additionally, the calculator can help you determine which products are the most profitable and identify areas where you could make changes to improve your bottom line.
3. Helium 10
With the Helium 10 Amazon Profit Calculator, online merchants can weigh all the factors that determine a product's profitability and price their items accordingly.
The calculator considers shipping and handling fees, Amazon’s referral fees, and other associated costs. It also provides data on how long it will take for a product to sell at a price point and calculates revenue after accounting for all associated costs.
4. AMZScout FBA Fees Calculator
AMZScout is a web-based tool that lets you calculate your Amazon FBA fees. It’s simple to use; just enter the weight and dimensions of the product you want to sell, and AMZScout will tell you how much it will cost to ship your item to Amazon. The tool also calculates your expected profit so you can see how much money you’ll make on each sale.
AMZScout is an excellent resource for anyone who wants to start selling on Amazon. The fee calculator makes it easy to figure out how much it will cost to ship your products and the profit calculator tells you how much money you can expect to earn as well as how to calculate COGS. With AMZScout, there’s no guesswork involved; you know exactly what your expenses will be and how much profit you can expect to make.
5. Viral Launch Amazon FBA Revenue Calculator
When it comes to making a profit on Amazon, it's important to be able to track Amazon FBA profit. This is where the Viral Launch Amazon FBA Profit Calculator comes in.
The calculator is easy to use and can help you determine your profits with just a few simple clicks. You simply input your product's details, including its weight, dimensions, and price, and the calculator will tell you how much profit you can expect to make on each sale.
» Learn more about Amazon FBA calculators to avoid costly mistakes
Benefits of Profit Calculators
There are many benefits of using a profit calculator, but the 3 main reasons are to help you:
Determine accurate profit marginsCalculate sales potentialPrice your products accordingly
A profit calculator can help you determine how much you need to sell each product in order to cover all of your costs and make a profit.
For further help with profit calculations, take a look at our top profit calculating mistakes to avoid.
» Discover the best profit calculator apps for Shopify
Profit calculationBest Profit Calculator Apps for ShopifyOne of the most impressive features of Shopify is the access to its wide range of apps. Shopify apps act as a middleman between you and the unique features you can use on your Shopify store’s admin.
The profit calculator apps for Shopify are some of the most useful apps for small businesses as they effortlessly and automatically track profits and expenses, allowing you to focus on growing your business.
What to Look For in a Shopify Profit Calculator App
Shopify Profit Calculator apps can assist in monitoring and evaluating fees by providing a breakdown of the Shopify fees associated with each sale. Before choosing an app, examine the following when looking for a profit calculator app:
Ease of useAutomation or manual inputPricingWhat does the app provide other than simple outputs?
A Shopify profit calculator is a tool that gives e-commerce merchants the ability to estimate their potential profits and automatically track their business expenses - helping to avoid miscalculations and mistakes. The tool considers various factors, such as shipping costs, product prices, taxes, and other losses to find out exactly how much money an online seller can expect to make after expenses.
Additionally, profit calculator apps can provide insights into what investments are worth their initial costs, making them the perfect system over the long term.
Top 3 Profit Calculator Apps
The best profit calculator apps provide access to not only accounting-related information, like those available through BeProfit’s customizable analytics, but also a wide range of other features.
1. BeProfit Profit Calculator App
The BeProfit app is the fastest, easiest, and most powerful way to track your profit - not to mention its one of the best profit calculators for Amazon. With BeProfit’s in-built Shopify pricing calculator, you can make educated decisions to maximize your profits - even if you are running multiple stores or selling on multiple platforms. The app automatically syncs with your Shopify store and other sales channels so you can quickly identify profits and trends.
Key features:
Automate your business' finances, calculates your profits and expenses,and make it easy than ever to keep track of your business' progressMonitor sales, expenses, and profits in real-time, allowing business owners to make sound decisions about where to allocate their resources for maximum gainThe Shopify fees calculator allows business owners to enter their monthly sales volume and see how much they're spending on Shopify services each month
2. TrueProfit ‑ Profit Tracking
TrueProfit is a gross profit calculator app that tracks your income and expenses in real-time. It automatically detects any sales made on your Shopify store and calculates the exact profit made by your business. Additionally, the TrueProfit app can also be used as a Shopify fees calculator or Shopify shipping calculator.
Key features:
Make quick and informed decisions about where to allocate resources in order to grow your online businessThe app's user-friendly interface makes it easy for businesses to get started quickly, while its comprehensive reporting capabilities provide insights that can help businesses optimize their operationsTrueProfit's cloud-based architecture ensures that businesses can access their data from anywhere at any time
3. Delirious Profit
The Delirious Shopify profit margin app was developed to bring the ease of getting accurate sales data, analyzing it, and being able to adjust prices in real-time. The app is specially designed for retailers who are always looking for ways to grow their business.
Key features:
Includes features such as graphs, charts, and customizable reports that make it simple for business owners to see where their money is coming and goingThe app's simple, intuitive interface makes it easy to use, even for those who are not tech-savvyProvides historical data, so businesses can track their progress over time
What Can a Shopify Profit Calculator Do for You?
There are a few mistakes to avoid when calculating profit in order to ensure an accurate figure. To help you out, below, we've listed some factors to take into consideration.
Calculate Blog Ad Revenue
Shopify calculators take the guesswork out of how much revenue can be generated from ads, and help to ensure that businesses are getting the most out of their advertising space. The calculators can also identify which ad placements are most effective, and how to adjust ad campaigns for better results.
If you'd like to know more about profitability, read our customer profitability analysis guide.
Calculate Shopify Fees
With help from a Shopify calculator, businesses can accurately calculate their Shopify fees and other expenses associated with using Shopify. This allows businesses to keep their shop running smoothly without any surprises.
Calculate Shopify Taxes
Shopify calculators provide business owners with the ability to understand and calculate taxes. Business owners can use the calculators to figure out how much they need to charge for taxes, what their tax liability will be, and more. The calculators are a great resource for business owners and help make tax season a little less stressful.
Calculate Shopify Shipping Rate
Shopify shipping calculators are also designed to help merchants understand and calculate shipping rates. The calculators are easy to use and provide accurate rates for a variety of shipping services. This makes it easy for merchants to find the best shipping service for their needs and budget. Additionally, the calculators take into account Shopify's built-in discounts on shipping rates, which can save merchants money on their shipping costs.
Profit calculationAmazon FBA Profit Calculator Is Inaccurate—How Sellers Can Avoid Costly MistakesWhile the Amazon FBA profit calculator is a handy tool, it shouldn't be taken as gospel. What do we mean by that? The information you get from the Amazon FBA profit calculator is not wrong—but it is only a guideline for your revenue analysis.
So, why use the calculator at all then? Because it still gives you a good idea of your revenue. But, you need to understand the inaccuracies so that you don't get caught, like many others, with small errors that end up costing you a small fortune. It also needs to be used in conjunction with other profit calculation methods.
The bottom line: to promote your Amazon products at a fair price, you need an accurate calculation of the FBA costs to maximize your e-commerce profit margin.
Understanding the Difference Between FBA and FBM
It's essential first to understand what FBA means and how it differs from FBM. Where FBA stands for Fulfilled by Amazon, FBM stands for Fulfilled by Merchant.
What's the difference between FBA and FBM? With FBA, the merchant pays Amazon to store and ship its inventory. With FBM, the merchant stores and ships the inventory in-house—that is, this function is not outsourced to Amazon.
Why the Amazon FBA Profit Calculator Isn't Always Accurate
The Amazon FBA calculator—otherwise known as the Amazon profitability calculator—isn't always 100% accurate. This is because many sellers have different products and unique requirements. It would be almost impossible to create an accurate calculator that would work perfectly for such a vast market of sellers.
Amazon confirms this in its disclaimer:
This Fulfillment by Amazon Revenue Calculator should be used as a guide in evaluating FBA only. Amazon does not warrant the accuracy of the information or calculations in this Revenue Calculator. Independent analysis of the output of this Revenue Calculator should be conducted to verify the results.
Avoiding 5 Expensive Amazon FBA Mistakes
These are five of the most common mistakes that sellers make and how they can be avoided:
1. Taking Your Eyes off Your Books and Accounting
Never lose track of your books. For your Amazon FBA business to work, you need to very carefully calculate your profits on your own, using the FBA calculator as a guide.
The one disadvantage of Amazon is that you have many competitors. Your calculations need to be so sharp that you offer the best value for money.
2. Not Understanding the Full Scope of Fees Charged
There are Amazon selling fees and FBA fees. Both sets of fees depend on different variances.
For example, if you buy too much stock and it stays in Amazon storage for longer than expected, fees could increase. You need to know and understand the full details of the fees charged.
3. Not Realizing That There Are Gaps in the Calculations
The calculator takes the basic costs into consideration. It doesn't take expenses like taxes, advertising and Amazon product promotion, and overheads into account.
You would need to include these and other hidden costs when tracking your expenses for a more accurate picture of your profits.
4. Not Including Returns in Your Calculations
Inevitably, there will be defective products and packaging. There will also always be customers that are not happy with your products. Sending products back will cost you, and this also needs to be accounted for.
5. Not Providing Amazon With Accurate Descriptions of Your Products
If you input inaccurate dimensions of your products, you could be calculating the total costs of storage and delivery incorrectly.
Let's look at an example. You sell a product for years, and it gets updated. Expectedly, the new packaging is slightly bigger than the previous packaging. You calculate costs according to the old specs, and Amazon calculates costs according to their measurements while in storage.
» Learn how to track and calculate your profit on Amazon FBA
Other Ways to Calculate Your Profit
Fortunately, you don't need to rely 100% on the Amazon version, as there are other calculators to use.
Five FBA calculators you could consider if you would like to research other options include:
Seller App AMZScoutJungle Scout Viral LaunchHelium 10
» Discover the best Amazon FBA calculator
Finding the Best Solution
There are various other ways to calculate your profit—each different way will work better for some e-commerce stores than others. You should take some time to try the different versions out simultaneously, and you will soon see which calculator is the most accurate for your business and your products.
There is no manual to give you all the right answers; otherwise, everyone would be highly successful Amazon merchants. The trick is to learn and keep learning, research and keep researching, and never stop growing. Good luck!
Profit calculationHow to Track and Calculate Your Profit on Amazon FBAYou may be wondering what Amazon FBA is, and you are not alone. It stands for Fulfillment By Amazon, a service that helps Amazon sellers outsource their shipping requirements to Amazon.
How the Amazon FBA Calculator Works
The Amazon FBA calculator is a very handy tool for anyone who is thinking about outsourcing their shipping requirements to Amazon to avoid having to calculate your own shipping costs. It calculates how much money you will make selling your products through Amazon's logistical network. It goes without saying that you need to have a clear understanding of the costs involved in running your e-commerce store, and shipping is an important aspect of those costs. Just make sure you know what mistakes to avoid when calculating profit.
Also, take note that each of marketplace has its own revenue calculator, including Australia, Canada, China, USA, UK, and various European and South American countries.
» Learn more about Amazon FBA profit calculators
Amazon FBA Profit and Loss Spreadsheet
Amazon FBA has a few handy tricks up its sleeve—one of them being its profit and loss spreadsheet. Make no mistake, the spreadsheet can be tricky if you don't manage it well; however, it can be managed better if it is all incorporated into an analytical dashboard.
How to Use the Amazon FBA Calculator
The Amazon FBA calculator is a relatively straightforward tool, designed to show potential sellers how much they can expect to spend on fulfillment, and how much profit they can make. To get started, you’ll need to log into your Amazon account and enter your Seller profile. Click on the Amazon FBA Calculator, or visit this link if you’re having problems.
Step 1: Find the Relevant Product
Firstly, you must input an “identifier” number to find the product you’re researching. You can use a search term, ISBN, EAN, or ASIN, depending on the information you have, and select a specific location for your search.
Step 2: Set the Price
Next, you can input values into the fields within the “Amazon Fulfillment” space to figure out a margin for the product. The first value to enter is the price of the item. Research similar products for inspiration and play around with the pricing to see what kind of margin you can achieve when raising or lowering the price.
Step 3: Determine Shipping Costs
Fill in the “Ship to Amazon” field. If you’re already selling products via Amazon, you should have a good sense of what the average unit price is to ship your items to the Amazon warehouse. This number varies based on the size, weight, and quantity of products being shipped. Again, experiment with a range of costs to see how it impacts the margin.
Step 4: Determine Product Cost
Complete the “Cost of Product” field. This is where you input the price it costs to purchase your product from a wholesaler or manufacturer. Make sure you use the “all-in” cost, including the price for any overseas shipping, packaging materials, customs, and any extra expenses related to purchasing your items.
Step 5: Calculate Your Margins
Click the “Calculate” button. From here, the calculator will give you a net profit and net margin for the product as well as your selling on Amazon fees and fulfillment costs.
Other Ways to Calculate Profit on Amazon FBA
Amazon FBA Profit Margin Calculator
This calculator gives a broader view because you can include all your expenses to get to your net profit per unit. To use this calculator, you start by entering some basic information as well as your fixed costs and upfront costs per product. Your job is to replace the red information in the table provided with your own information. You don't need to do anything with the green figures; those are formulas. Just enter "0" if something doesn't apply to your business.
The next step is to enter your marketing costs under "advertising" and "promotions and giveaways," but only if you have marketing costs. And finally, enter "calculate," and you'll get your gross margin calculations.
Amazon Profit and Loss Dashboard
You can also give the BeProfit profit tracker tool a try. BeProfit offers one of the most accurate profit calculators available on the market today. It includes a data analytics dashboard specifically developed for e-commerce businesses. This innovative tool helps you to stay on top of your business finances while optimizing your bottom line. It is easy to navigate and can be a trusted partner that supports you through the highs and lows of your business's journey.
FBA is a service offered to businesses that helps them grow by using Amazon's extensive logistics network. It's quite simple in practice—businesses send their products to an Amazon fulfillment center. Once the products are at the center, and a customer buys one, Amazon receives, packs, and ships those orders, while taking care of customer service, returns, and refunds.
This isn't the only way to fulfill your e-commerce orders with Amazon—read our Amazon FBA vs FBM post and our dropshipping on Amazon for beginners guide to learn more.
Calculate Your Amazon FBA Fees
Before you start your business and throughout your product's lifecycle, your very first step is to consider all your costs. There are four main categories of costs that you would need to look into on Amazon:
Upfront costs
You'll need samples, and you'll need to ship those samples.Variable costs
This includes your FBA fees (15% of your product's price plus $3 to handle and ship your product), returns, and storage fees.Marketing costs
You'll have to launch your products at some point and then promote them on an ongoing basis.Business costs
This includes insurance, taxes, salaries, and wages. These costs largely depend on the product(s) you are selling.
All these costs will impact your profits. To offer your customers a product that is value for money, you need to finetune your expenses and sharpen your calculations to find the perfect match between your profit margins and your customer's pocket. Additionally, you'll need an Amazon profit calculator.
Struggling to optimize your spending? Read our guide to using Amazon advertising reports to help you do so.
» Find the best Amazon FBA calculator
Is Amazon FBA Profitable?
The short answer to this question is yes. The long answer to this question takes a couple of statistics into account. Firstly, did you know that Amazon’s revenue was $386 billion in 2020? That's quite a leap from $280 billion in 2019. Almost half (54%) of this revenue comes from third-party sellers! But that's not all. A total of 92% of those third-party sellers use Amazon FBA.
The bottom line is that the demand for online shopping has increased significantly since the onset of COVID-19. People are feeling more comfortable with online shopping and are, therefore, exploring different online shopping avenues. To drive the point home, 62% of online shoppers start their search for the products they want to buy on Amazon. If that doesn't convince you, nothing will!
And once you get started, be sure to take a look at our guide to promoting your Amazon products.