Most resellers start by looking at their bank account balance to see if they're making money. This is called "bank balance accounting," and it's a recipe for disaster. To build a sustainable business, you need to understand the core metrics that drive your profitability.
1. The Golden Formula
At its simplest level, your profit is calculated as:
Seems simple, right? But each of these components has hidden complexities that trip up even experienced sellers.
2. Understanding COGS (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, COGS is NOT the total amount you spent on inventory this month.
Example:
You buy 100 items for $1,000 in January. You sell 10 items in January. Your COGS for January is $100 (10 items * $10/item). The remaining $900 is Inventory Asset, not an expense.
This distinction is vital for taxes. You can only deduct the cost of inventory in the year you sell it (unless you use the "Cash Method" for small businesses, but even then, tracking per-item profitability is essential for business health).
3. The "Death by a Thousand Cuts": Fees
Marketplace fees are the silent killer of profit margins. You need to track:
- Platform Fees: eBay's 13.25%, Poshmark's 20%, Mercari's 10% + 2.9%.
- Transaction Fees: Usually 2.9% + $0.30 per sale.
- Shipping Costs: Labels, insurance, signature confirmation.
- Ad Fees: Promoted listings can take another 2-15%.
4. Gross Margin vs. Net Margin
Gross Margin tells you if your sourcing strategy is working.
Formula: (Sales - COGS) / Sales
If you buy a shirt for $5 and sell it for $20, your Gross Profit is $15, and your Gross Margin is 75%. This looks great!
Net Margin tells you if your business model is working.
Formula: (Sales - COGS - All Expenses) / Sales
Take that same shirt. $20 Sale - $5 COGS - $4 Fees - $5 Shipping - $1 Packaging = $5 Net Profit. Your Net Margin is 25%.
If your Net Margin drops below 15-20%, you are working very hard for very little return.
5. Cash Flow: The Oxygen of Your Business
You can be profitable on paper but bankrupt in reality if you run out of cash. This happens when you reinvest too much into inventory that sits on shelves.
Sell-Through Rate is the metric to watch here. It measures how fast you turn inventory into cash.
High margins with low sell-through means your cash is trapped. Low margins with high sell-through (like Amazon FBA) can generate massive cash flow but requires volume.
How Eclipse Helps
Tracking all of this manually in a spreadsheet is possible for 10 items a month. For 100+ items, it's a nightmare.
Eclipse automates the entire process:
- Syncs with eBay/Shopify to pull sales and fees instantly.
- Matches sales to inventory to calculate accurate COGS.
- Shows your real-time Net Profit and Margins on a dashboard.
- Alerts you to low-margin items so you can adjust pricing.
Stop guessing your numbers. Start running your resale business like a CEO.