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Gross Profit — Revenue minus the direct cost of the products sold, before any other business expenses are subtracted.
What Is Gross Profit?
If a product sells for $50 and costs $20 to source, the gross profit is $30. That number doesn’t yet account for ad spend, subscriptions, or other running costs — those come out later, on the way to net profit.
How to Calculate Gross Profit
Formula: Revenue − Cost of Goods Sold (COGS).
Gross Profit vs. Net Profit
| Gross Profit | Net Profit | |
|---|---|---|
| Includes | Only the direct cost of the product | All costs, including operating expenses |
| What it shows | Profit before overhead | True bottom-line profit |
Why Gross Profit Matters for Dropshippers
Gross profit is usually what dropshippers mean when they talk about “margin” on a single order. It’s useful for comparing products or suppliers, but it isn’t the full picture of whether the business itself is profitable.
FAQ
Is gross profit the same as profit margin?
Not exactly — gross profit is a dollar amount, while profit margin expresses that same relationship as a percentage of revenue.
Does gross profit include shipping costs?
It depends on how a store defines cost of goods sold — some include the supplier’s shipping cost in COGS, while others just track the product cost.
Why track gross profit separately from net profit?
Gross profit isolates product-level profitability, which makes it easier to compare products or suppliers without operating costs muddying the comparison.