What is Net Profit?
Net profit is total revenue minus all costs (COGS, ads, shipping, wages, taxes, everything). The "true" bottom line — what's actually left.
Formula
Example
If monthly revenue is $50K and total costs are $43,750 (COGS, ads, shipping, wages, taxes, software), net profit = $6,250 (12.5% net margin)
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Related Terms
Net Margin
Net margin is the profit percentage remaining after all costs (COGS, ads, shipping, operations). The e-commerce median is just 3% — every percentage point matters.
EBITDA
EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization) is operating profit before interest, taxes, depreciation, and amortization. A comparable "operating profit" proxy.
Contribution Margin
Contribution margin shows how much a product "contributes" toward covering fixed costs after all variable costs are deducted. The evolved version of margin.
Gross Margin
Gross margin is the difference between revenue and COGS, as a percentage. With the median e-commerce net profit at 3%, this number determines viability.