Frequently Asked Questions
What is the difference between gross revenue and net profit?
Gross revenue is the total amount of money you earn from sales before any deductions. Net profit is what remains after subtracting all costs including platform fees, payment processing, product costs, refunds, fixed expenses, and ad spend. Net profit is your actual take-home pay.
How do I calculate profit margin?
Profit margin is calculated as (Net Profit ÷ Revenue After Refunds) × 100. It shows what percentage of your revenue is actual profit. For example, if you earn $500 in revenue and keep $343.50 as profit, your profit margin is 68.7%.
Why is my net profit lower than expected?
Your net profit might be lower than expected due to: 1) Platform fees taking 5-10% of revenue, 2) Payment processor fees of 2.9-3.9% plus fixed fees, 3) Refunds reducing your actual revenue, 4) Fixed costs like software and tools, or 5) Ad spend that doesn't generate enough sales.
What's a good profit margin for digital products?
Digital products typically have high profit margins of 60-90% because production costs are low. However, your actual margin depends on platform fees, ad spend, and fixed costs. A margin above 70% is generally good for digital products sold on your own platform. Platform-based sales may have lower margins due to higher fees.
How do I increase my net profit?
1) Increase your price - Higher prices mean more revenue per sale
2) Reduce product costs - Lower license fees or production costs
3) Choose the right platform - Compare Etsy, Gumroad, Shopify fees
4) Improve conversion rates - Better listings and descriptions
5) Optimize ad spend - Focus on high-converting keywords and audiences
6) Reduce fixed costs - Cancel unused tools and subscriptions
Should I include my time as a cost?
This calculator shows your financial profit, not your hourly rate. If you want to factor in your time, calculate your hourly rate separately by dividing your net profit by hours worked. Most digital product sellers reinvest profits into growth rather than paying themselves a salary in the early stages.
How do refunds affect my profit?
Refunds reduce your gross revenue and you still pay platform and payment processor fees on refunded sales. For example, if you sell a $20 product and refund it, you lose the $20 revenue but still pay ~$1.50 in fees. This calculator factors in refund rate to show your true profit after refunds.