How to Calculate Operating Income (Formula & Examples) in 2025
- Total Revenue: $50,000
- Cost of Goods Sold (COGS): $20,000 (includes product sourcing and manufacturing)
- Gross Income: $50,000 - $20,000 = $30,000
- Operating Expenses: $10,000 (marketing, Shopify apps, shipping, rent, salaries)
- Operating Income: $30,000 - $10,000 = $20,000
- Direct Costs (COGS): These are costs directly tied to product sales, such as wholesale product costs, manufacturing, and shipping fees.
- Indirect Costs (Operating Expenses): These include expenses like advertising, website hosting, software subscriptions, and customer service wages.
- Evaluate Profitability: It helps you see if your store is making real profit from selling products, not just generating revenue. Check this article to understand the key difference between net profit vs. revenue.
- Guide Pricing Strategies: If your operating income is low, you may need to adjust product pricing strategies or reduce costs.
- Attract Investors or Loans: A strong operating income makes your store more attractive to potential investors or lenders.
- Help With Business Growth: Understanding operating income allows you to reinvest wisely into ads, product expansion, or improving customer experience.
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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