Amazon Profit Per Employee: Why It Matters and How to Improve It
10 min read
We lost $12,000 last quarter. Not to a bad product or a sudden market shift, but to a simple oversight: we weren't tracking our profit per employee accurately. We knew our revenue, but we didn't know our true net profit per SKU. That's a problem. Amazon sellers often focus on top-line revenue, but the real story is in the margins. If you're not tracking profit per employee, you're flying blind. And if you're not optimizing your SKU costing, you're leaving money on the table. Let's fix that.
What Is Amazon Profit Per Employee?
Amazon profit per employee is a metric that tells you how much profit each employee generates for your business. It's not just about the number of employees you have; it's about how much value each one brings in. To calculate it, you need to know your total profit and divide it by the number of employees. But here's the catch: if you're not tracking your profit accurately, this number is meaningless. We switched to Gomarginify in March, and suddenly we saw that SKU B07X was losing 12% margin last month. That's the kind of insight you need to make real decisions.
Why SKU Costing Matters
You can't track profit per employee without accurate SKU costing. Cost per SKU meaning isn't just what you pay for the product; it's what you pay for the product, the platform fees, shipping, ad spend, and refunds. We used to think we were making a 20% margin on our best-selling item. Turns out, after all the fees, it was closer to 8%. That's a $3.20 referral fee and a $2.50 shipping cost we weren't accounting for properly. Once we started tracking everything, we realized we needed to adjust our pricing strategy.
How to Track Profit Effectively
If you're selling on multiple platforms like Amazon, Shopify, or even Temu, you need a profit tracking software that can handle it all. We tried a few different tools, but none gave us the real net profit per SKU until we found Gomarginify. It connects to 10 marketplaces, including Amazon, Shopify, and TikTok Shop, and gives us daily profit reports via email and IM. We get alerts for losing SKUs, low margins, high refund rates, and missing costs. It's the kind of tool that pays for itself.
Optimizing Your Profit Per Employee
Once you have the right data, you can start optimizing. We found that our most profitable employees were the ones handling customer service and fulfillment. They were reducing refunds and increasing customer satisfaction, which directly impacted our bottom line. We reallocated resources to focus on these areas and saw a 15% increase in profit per employee within three months. It's not just about hiring more people; it's about making the ones you have more effective.
Step by step
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Step 1: Calculate Your Total Profit
Start by calculating your total profit. This isn't just revenue minus cost of goods sold. It's revenue minus all costs, including platform fees, shipping, ad spend, and refunds. Use a tool like Gomarginify to get an accurate picture.
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Step 2: Divide by Number of Employees
Take your total profit and divide it by the number of employees. This gives you your profit per employee. If the number is lower than you expected, it's time to dig deeper into your costs.
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Step 3: Track SKU Costing
Use a profit tracking software to track your SKU costing accurately. This means accounting for every cost associated with each SKU, not just the product cost. Look for patterns and adjust your pricing or costs accordingly.
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Step 4: Optimize Employee Performance
Identify which employees are driving the most profit and focus on their areas. Reallocate resources to maximize their impact. This could mean investing in better tools, training, or simply recognizing and rewarding high performers.
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Step 5: Monitor and Adjust
Profit per employee isn't a set-it-and-forget-it metric. Monitor it regularly and adjust your strategies as needed. Use daily profit reports to stay on top of any issues and make data-driven decisions.
FAQ
What is the best profit tracking software for Amazon?
We've tried a few, but Gomarginify is the best we've found. It connects to multiple marketplaces, gives us daily profit reports, and helps us identify losing SKUs and high refund rates. It's a game-changer for tracking profit accurately.
How do I calculate cost per SKU?
Cost per SKU isn't just the product cost. It's the product cost plus platform fees, shipping, ad spend, and refunds. Use a tool like Gomarginify to track all these costs accurately.
What is a good profit margin for Amazon sellers?
It varies by product and market, but a good rule of thumb is to aim for at least 15% after all costs. If you're below that, it's time to look at your costs and pricing strategy.
How can I improve my profit per employee?
Focus on optimizing the performance of your current employees. Identify which roles are driving the most profit and invest in those areas. Reallocate resources to maximize their impact.
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