Wendell ran a tidy little reselling side hustle for two years before he could answer a friend's simple question: "How much do you actually make per hour?" He had revenue. He had vague sense of margin. He did not have an answer, and that bothered him enough to spend a Saturday rebuilding his tracking from scratch.
True reselling profit is not complicated. It just has more cost lines than most sellers track. Here is the full formula, what belongs in each line, and the labor-adjusted hourly rate that turns a "good month" into either a real business or a 60-hour hobby.
The Full Formula
True net profit = Gross sales − Platform fees − Shipping cost − Landed COGS − Supplies − Mileage − Software/admin − Tax reserve − Labor cost
The last two lines are where the gap between "I made money" and "I built a business" lives. Most resellers stop at COGS and supplies and call it good. Wendell's first honest run included labor and stopped him from quitting his day job too soon.
Line by Line, Plain English
Gross Sales
The dollar figure on platform payouts before any deductions. Easy to find. Easy to celebrate. Not your money yet.
Platform Fees + Processing
The percentage and flat fees each platform takes. Pull them from payout statements, not from memory. If your effective fee rate doesn't match the headline number, look for refund handling and offer-related reductions.
Shipping Cost (Net of What Buyers Paid)
Buyer paid $5 in shipping. Your label cost $6.20. You absorbed $1.20. This line is the most under-tracked margin leak for sellers shipping heavy items at flat rates.
Landed COGS
What you paid for the item plus any sales tax paid at sourcing. Item-level, not average-cost. If you ran your spreadsheet on average-cost, the months where you happen to sell more low-COGS items will look better than they are.
Supplies
Tags, tape, hangers, packing paper, bubble mailers, ink, photo backdrop. Sum monthly. The number is bigger than it feels.
Mileage
Sourcing trips, post office runs, mall visits. Track miles, not gallons. Use the IRS standard mileage rate for US sellers; it is more favorable than itemized gas for most.
Software / Admin
Inventory app, cross-lister, scheduler, label software, photo storage, accountant fees, business cards, business-use share of phone plan.
Tax Reserve
Even if your final tax bill is lower, set aside roughly 20–30% of net (after the lines above) to avoid quarterly surprises. The exact number depends on your bracket and state—your accountant has the real answer.
Labor Cost
The line most sellers refuse to look at. Hours of sourcing, photography, listing, packing, customer service, drop-off, bookkeeping. Multiply by a fair hourly rate (start at $20/hour if you want to feel honest about it). If your business doesn't pay your labor at a reasonable rate, you have a hobby with deductions, not a small business.
Wendell's Month-in-Numbers Example
One real month, simplified:
| Line | Amount | Notes |
|---|---|---|
| Gross sales | $4,820 | 112 items across 3 channels |
| Platform fees + processing | −$612 | Effective ~12.7% |
| Shipping (net) | −$118 | Mostly under-charged on heavy items |
| Landed COGS | −$1,890 | From item-level log |
| Supplies | −$144 | Tape, mailers, tags, ink |
| Mileage (920 mi @ IRS rate) | −$614 | Use whatever current rate applies |
| Software / admin | −$58 | Inventr + cross-lister + portion of phone |
| Operating profit | $1,384 | 28.7% of gross |
| Tax reserve (~25%) | −$346 | To savings, not spending |
| Net (pre-labor) | $1,038 | 21.5% of gross |
| Labor (84 hours @ $20) | −$1,680 | The honest line |
| True net (after labor) | −$642 | His business was paying him less than $20/hr |
That last line was the conversation he never wanted to have with himself. The business looked profitable until labor entered the formula. His actual hourly was about $12.40/hour ($1,038 net divided by 84 hours)—real money, but not full-time-replacement money.
That clarity drove three changes: stricter sourcing thresholds (no items under $15), tighter category focus (less low-margin commodity, more high-margin niche), and listing automation to cut time per item. Three months later his hourly was $24/hour. The formula was the same—the inputs got better.
The Three Profit Numbers Resellers Should Track
- Gross profit per item = Sale price − Fees − Landed COGS. Useful for category analysis.
- Operating profit per month = Sum of monthly gross profit − Supplies − Mileage − Admin. Useful for P&L.
- Net per hour = (Operating profit − Tax reserve) ÷ Total hours worked. Useful for life decisions.
The third number is the one that tells you whether to invest more time, raise prices, change categories, or get a different job. The first two flatter you; the third one tells the truth.
What People Get Wrong
- Confusing gross margin with net margin. "I bought it for $5 and sold it for $25, that's 80% margin!" Not after $4 in fees, $2 in supplies, and 35 minutes of labor. Different math, same item.
- Treating average COGS as item COGS. Hides which categories drag the business.
- Skipping labor. Easy to do. Distorts every decision after it.
- Annualizing best months. "I did $6K this month, that's $72K a year!" Best months are not annual rates.
Connecting Profit to Revenue Thinking
If your tracker celebrates revenue and your bank account confuses you, the gap is the cost stack above. The detailed framing piece on the same idea sits at Why Revenue Isn't Profit. For cross-platform fee math when you're modeling per-item gross profit, the side-by-side breakdown lives in Platform Fee Comparison: eBay vs Poshmark vs Mercari.
The Quarterly Habit That Pays for Itself
Once a quarter, Wendell runs the full formula. The labor line gets recomputed using his actual hours. The result tells him what changed—sourcing, listing speed, fee mix, category mix—and what to focus on for the next quarter.
True net profit is not glamorous math. It is the math that tells you whether the business is paying you. That answer changes nothing if you don't run it, and changes a lot when you do.