Most resellers start by checking their bank balance to see whether they are making money. That is bank balance accounting, and it hides most of what matters. To build a sustainable business, you need the core numbers that drive profit.
1. The golden formula
At its simplest, your profit is:
Sales price − Cost of goods − Fees and expenses = Net profit
Simple enough. But each part has details that trip up even experienced sellers.
2. Understanding cost of goods sold
Cost of goods sold is exactly what it sounds like: the cost of the specific items you sold during a period. Crucially, it is not the total you spent on inventory this month.
Example
The distinction matters for taxes. Inventory is generally deducted as you sell it, though some small businesses can use simpler methods. Either way, tracking profit per item is essential for knowing how the business is doing.
3. Death by a thousand cuts: fees
Marketplace fees quietly eat margins. Track each of these:
- Platform fees: final value or commission fees that vary by marketplace and category, often between 10 and 20 percent of the sale.
- Payment processing: often a percentage of the order plus a small fixed fee.
- Shipping: labels, insurance, and signature confirmation.
- Advertising: promoted listings can take a further share of each sale.
Check each marketplace's current fee page, since rates change often.
4. Gross margin and net margin
Gross margin tells you whether your sourcing works: (sales minus cost of goods) divided by sales. Buy a shirt for $5 and sell it for $20, and your gross profit is $15, a 75% gross margin. That looks great.
Net margin tells you whether your business model works: (sales minus cost of goods minus all expenses) divided by sales. Here is the same shirt:
- Sale$20.00
- Cost of goods-$5.00
- Fees-$4.00
- Shipping-$5.00
- Packaging-$1.00
- Net profit$5.00
If your net margin drops below 15 to 20 percent, you are working very hard for very little return. Try the time savings calculator to see what your bookkeeping hours cost on top of that.
5. Cash flow: the oxygen of your business
You can be profitable on paper and still run out of cash. It happens when you reinvest too much into inventory that sits on shelves.
Sell-through rate is the metric to watch. It measures how fast inventory turns back into cash. High margins with low sell-through trap your cash. Low margins with high sell-through can generate strong cash flow, but they need volume.
How Eclipse helps
Tracking all of this in a spreadsheet works for 10 items a month. At 100 or more, it becomes a second job. Eclipse handles the repetitive parts:
- Brings in sales and fees from connected channels. eBay, Amazon, and Shopify are rolling out.
- Matches sales to inventory cost so cost of goods sold stays accurate.
- Shows net profit and margins by item and by channel.
- Keeps everything in double-entry books your accountant can review.
This article is general information, not tax or legal advice. Confirm the treatment for your business with a tax professional.