This is a great question… and one that is asked by every new Amazon seller. Sales is one thing… we can all see sales fairly quickly, but profit is an entirely different beast. Profit is the money we can “spend” on ourselves, or pay off debt or increase our Amazon inventory.
Profit depends on several things – the biggest is (of course) what you paid for the products you sell.
One of my favorite sayings is “Profit is made when you buy – not when you sell”. If you make a “bad buy” (I’ve made several) and you won’t see a profit.
Plus… profit comes “After” you pay all your expenses – those things that we must pay for other than inventory.
For instance – I have expenses for:
Seller Engine (my listing service)– monthly fee.
I pay for several monthly memberships to gain extra insight for special deals, hot product trends and the ability to ask questions of FBA sellers who have been at this “game” a very long time.
I’m also a Pro Merchant on Amazon – which cost’s about $40 bucks a month.
I also need to buy supplies – boxes, labels, tape etc.
And you must remember to account for gas!
If you are using your credit card to make inventory purchases – you must account for finance charges.
When you see me talk about buying products – I always look for products that I can “triple” my costs (at least). This helps to make sure my Amazon fees and postage are covered and I can still make “at least” 100% ROI (Return on investment).
Want to know when you “know” you are profitable?
When you have to pay income taxes! 🙂
Make sure you keep track of all the things you can “write off”. Plus – Remember you still have to take an accurate inventory count on December 31’st of each year. This inventory count is based on the “cost” of the product – so keep track of what you paid for your products.
Past experience shows that inventory is a pain in the neck… at least it only happens once a year.