Glossary
Net profit
Definition
Net profit vs revenue vs gross profit
Revenue is the total money that came in from sales. Gross profit is revenue minus the cost of the products you sold, also called cost of goods sold. Net profit goes further and takes out everything else: payment fees, shipping, returns, taxes, ad spend and fixed costs like rent or software.
The three numbers can tell very different stories. A month with strong revenue can still end in a net loss once ad spend and fulfilment costs are counted, which is why revenue on its own is a poor guide to how the business is doing.
How to work out net profit
The formula is revenue minus all costs. In practice the hard part is not the maths, it is having every cost in one place and knowing which figures are real rather than estimated. Missing a cost like real shipping or ad spend quietly inflates the profit number.
You can calculate it per order to see which sales are actually worth having. See how to calculate net profit on Shopify for the step-by-step.
Example
On a $100 order with $40 product cost, a $3 payment fee, $8 shipping and $15 of attributed ad spend: revenue is $100, gross profit is $60, and net profit is about $34.