- What is net profit per unit?
- Net profit per unit = Selling Price - COGS - Shipping - Platform Fee - Other Variable Costs. It is the actual profit left after every cost directly associated with fulfilling one sale. Tracking this metric prevents selling products that are unprofitable after all fees are accounted for.
- How does platform fee affect profitability?
- Platform fees (like PayPal, Etsy, Amazon, or Shopify transaction fees) are a percentage of the selling price, meaning higher-priced items carry a larger absolute fee. For example, a 3% fee on a $40 item is $1.20; on a $200 item it is $6.00. Factor this in before setting your price.
- What is the difference between gross profit and net profit per unit?
- Gross profit per unit = Price - COGS only. Net profit per unit deducts all variable per-unit costs including shipping, platform fees, and other direct costs. Net profit is the true unit economics figure; gross profit can be misleading if fulfillment and transaction costs are large.
- When is a negative net profit per unit acceptable?
- Rarely. A negative net profit per unit means you lose money on every sale, which cannot be offset by volume. However, some businesses accept a loss on a lead product to acquire customers who then purchase high-margin products. In that case, evaluate profitability at the customer level using LTV, not just per-unit.
