PROFIT GUIDE

How to Calculate the Real Profit on a Handmade Product

Why sales revenue and real profit are not the same number.

A product can sell for $40 and still produce much less than $40 of usable profit. Revenue is the money collected from a sale; profit is what remains after the costs required to make and sell that sale are accounted for.

Start with revenue

For a simple per-unit calculation, begin with the selling price actually paid by the customer. If you offer discounts, use the price after the discount rather than the original list price.

Build the full cost

Add the variable costs connected to the order. Typical examples include materials, packaging, direct labor, transaction fees, marketplace fees, and product-specific shipping costs.

Calculate what remains

A basic formula is:

Turn profit into a margin

Profit margin can be expressed as profit divided by revenue. This makes it easier to compare products with different price points.

Why this matters for product selection

Once you calculate profit consistently, you can see which products deserve more attention, which prices need adjustment, and which products consume too much time relative to what they return.