Glossary
Gross profit
Definition
Gross profit is revenue minus the cost of goods sold: what is left after you subtract what the products you sold cost you, before any other expenses. It sits between revenue and net profit. A healthy gross profit can still turn into a net loss once fees, shipping, returns and ad spend are counted.
Gross profit vs net profit
Gross profit only subtracts cost of goods sold. Net profit goes further and takes out everything else: payment fees, shipping, returns, taxes, ad spend and fixed costs.
Both matter. Gross profit tells you whether the products themselves make money; net profit tells you whether the business does.
Gross margin
Gross margin is gross profit as a percentage of revenue. If you sell $100 of goods that cost you $40, gross profit is $60 and gross margin is 60%.
Margin is often more useful than the raw number, because it lets you compare products of different prices on the same footing.
Example
Sell $100 with $40 product cost: gross profit is $60, a 60% gross margin. Net profit is lower once fees, shipping and ads come out.