It's time to calculate your profit margins so you know which products to keep, which to dump, and which need major adjusting. Many data points go into figuring out your exact profit margin, but these 3 metrics represent the most important parts of your accounting calculation.
You don't want to bother too much with your gross profit off of a product since that doesn't take into account the many expenses that made that sale possible. Your net profits look at the price you sold the product at, minus expenses such as the original inventory cost, marketing, administrative, building overheads, and other associated costs. If you don't include all direct and indirect costs that go into the cost of a product, you may end up losing money on an item that seems like a best seller at first glance. Calculating your net profits on a frequent basis helps you avoid your business bleeding money.
