How to Calculate Profit Per Unit (With Examples & Formulas)
- Are your prices high enough to cover your ad spend?
- Can you afford to run a promotion or discount?
- Should you double down on this product, or drop it entirely?
- Product or manufacturing cost
- Shipping and packaging
- Fulfillment fees
- Transaction fees (like Shopify or PayPal cuts)
- Refunds and returns (if calculated per item over time)
- Set profitable prices (without guesswork): Know your break-even point, margin buffer, and how much room you have to discount while still staying in the green.
- Catch low-margin products early: Not every best-seller is profitable. This metric lets you flag products with strong sales but weak returns before they eat into your bottom line.
- Plan smarter promotions: Want to offer 20% off or free shipping? Knowing your per-unit profit lets you calculate how far you can go without turning a win into a loss.
- Compare product performance fast: You’ll quickly see which SKUs are worth scaling and which ones deserve a quiet retirement.
- Compare products easily: Two products earn you $15 in profit. One sells for $30 (50% margin), the other for $60 (25%). That margin difference could determine which one is worth scaling.
- Track profitability trends: Monitor your margins month-to-month. A shrinking gross margin may signal rising supplier costs, higher return rates, or poor discounting strategy.
- Set smarter ad budgets: If your product has a 50% margin, you have more room to acquire customers profitably—even at a higher CPA.
- Gross profit = $10,000
- Operating expenses = $6,000
- Operating Profit = $4,000
- It reflects your actual take-home earnings.
- It helps you determine if your store is scalable or just breaking even.
- It’s essential for tax filing, investor reporting, and long-term planning.
Senior Content Executive at TrueProfit & SEO/Content Specialist
Tracy is a senior content executive at TrueProfit – specializing in helping eCommerce businesses scale profitably through content. She has over 4 years of experience in eCommerce and digital marketing editorial writing. She develops high-impact content that helps thousands of Shopify merchants make data-driven, profit-focused decisions.
Tracy is a senior content executive at TrueProfit – specializing in helping eCommerce businesses scale profitably through content. She has over 4 years of experience in eCommerce and digital marketing editorial writing. She develops high-impact content that helps thousands of Shopify merchants make data-driven, profit-focused decisions.
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