Building Your First Profit Analysis
Most makers know their total revenue but can't tell you which individual products are actually profitable. This simple 3-column spreadsheet changes that. Within 30 minutes, you'll identify your profit winners and money-losing products—and make strategic decisions that improve overall profitability by 20-30%.
The Blind Spot: Revenue vs. Profitability
Here's the trap most makers fall into:
- You see "$5,000 in revenue last month" and feel good
- But you don't ask: "Which products brought that $5,000? And which ones are eating it?"
- You keep making products that lose money because you can't see the breakdown
The 3-Column Profit Analysis
Here's the simplest system that actually works. You need three columns:
| Product Name | Sale Price | Total COGS | Profit Per Unit | Status |
|---|---|---|---|---|
| Ceramic Bowls | $45.00 | $18.50 | $26.50 | WINNER |
| Hand-Dyed Scarves | $60.00 | $35.00 | $25.00 | WINNER |
| Custom Earrings | $35.00 | $42.00 | $-7.00 | LOSER |
⚠️ The Moment of Truth:
Look at the "Custom Earrings" row. You're losing $7 per unit. If you sell 20/month, that's $140 in monthly losses ($1,680/year!). And you're probably spending time on them thinking they're generating revenue. They're not—they're a financial drain.
Real Monthly Impact
This profit analysis works hand-in-hand with other pricing strategies. Learn about calculating your true cost of goods to ensure your COGS number is accurate. Then use different pricing models for different products—some winners might use value-based pricing to maximize profit.
Here's the full picture for one month of sales:
Monthly Breakdown
What If You Stopped Making Earrings?
If you stopped making Custom Earrings and redirected those 20 hours/month to making more scarves:
Current monthly profit: $1,802.50
+$140 (stop losing on earrings)
+~$500 (more scarf profit from redirected time)
= $2,442.50 new monthly profit
= +$640/month (+35% improvement!)
How to Build Your 3-Column Analysis (30 Minutes)
1List Every Product You Make
Go through last month's sales. List each unique product or variation.
2Record Your Sale Price
What do you actually charge customers for each product? (Include platform fees if relevant)
3Calculate True COGS
Use the formula from our "True Cost of Handmade Products" article: Materials + Labor + Overhead + Platform Fees
4Calculate Profit Per Unit
Profit = Sale Price - Total COGS. If negative, you're losing money on that product.
5Rank by Profitability
Sort from highest to lowest profit. Your top 20% of products likely generate 80% of profit.
Profit Analysis Tools & Resources
Learn more about profit analysis and product profitability from trusted sources:
SBA Break-Even Analysis Guide
Small Business Administration guide to analyzing product profitability and breaking even.
Shopify: Tracking Product Profitability
E-commerce guidance on measuring and optimizing profit per product in your catalog.
Harvard Business Review: Measuring Profit
Research-backed approach to understanding profitability metrics.
Entrepreneur: 80/20 Rule for Profit
How to identify which 20% of products generate 80% of your profit.
Related Articles
Related Articles
You might also be interested in these related articles about artisan business management.
Identifying Unprofitable Products: Hidden Revenue Killers
Once you build your profit analysis, use it to find losers and eliminate them.
The 80/20 Rule for Makers: 20% of Products Generating 80% Profit
Use your profit analysis to identify your vital few products.
Customer Lifetime Value by Product: Why Some Items Drive Repeat Purchases
Track which products create loyal customers and recurring revenue.
Explore Pricing Fundamentals
This article is part of our complete pricing strategy hub. Master all aspects of pricing your handmade products for maximum profit.
View All Pricing Articles →Track Profit Per Product Automatically
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