Buying an e-commerce business: checking profit behind the listing
Published 25 October 2026
A store can report strong sales and send regular payouts to its bank account while earning much less than the listing suggests. Before buying, connect orders, settlements and operating costs for the same periods. Then ask what changes when you take over.
Start with records you can reconcile
Request monthly accounts, order exports, processor settlement reports and bank statements for matching dates. Where permission allows, review reports in the platform itself. A screenshot of a dashboard is a starting point, not enough to establish earnings.
Check what each report measures. Shopify, for example, defines net sales as gross sales less discounts and sales reversals. Its gross sales can include pending, canceled and unpaid orders. A platform sales total therefore needs reconciliation to the accounting records, including fulfillment, cutoffs and refunds. Sales tax collected for authorities is not the store’s revenue.
Separate sales, payouts and profit
Fictional example, all amounts in USD for one month: fulfilled orders produce $120,000 of sales before $10,000 of discounts and $8,000 of refunds. This leaves $102,000 of net revenue. There is no sales tax or separately billed shipping in these figures, and no unpaid orders, prior-period refunds, chargebacks or other revenue adjustments.
Assume customers pay $110,000 through one processor in the month and $8,000 of refunds are paid back through it, leaving $102,000 before fees and reserves. The processor deducts $3,000 of fees and holds $4,000 in a new reserve, sending $95,000 to the bank. Opening processor and reserve balances are zero, and there are no other unsettled amounts or movements. The reserve remains a receivable under the example’s assumption that it is recoverable. It reduces cash received now, not profit by itself.
| Monthly sales and settlement (USD) | Amount |
|---|---|
| Sales before discounts and refunds | $120,000 |
| Less discounts | ($10,000) |
| Less refunds | ($8,000) |
| Net revenue | $102,000 |
| Less processor fees withheld | ($3,000) |
| Less new reserve held | ($4,000) |
| Payout to the bank | $95,000 |
Now account for the operating costs
For that same fictional month, assume $40,000 of cost of goods sold, net of returned goods; $18,000 of advertising; $9,000 of fulfillment; the same $3,000 of processor fees; and $12,000 of other operating costs. That last amount includes the labor needed to run the store, software, overhead and depreciation. Assume these are all the period’s costs before interest and income tax, with no overlap between categories.
Subtracting these costs from $102,000 leaves $20,000 of illustrative operating profit before interest and income tax. Processor fees are deducted once in this profit calculation. The $4,000 reserve is not deducted again. These invented costs are not industry benchmarks, and $20,000 is not a valuation or the cash available for debt payments or an owner’s withdrawal. One month is also not a reliable annual run rate.
| Monthly profit calculation (USD) | Amount |
|---|---|
| Net revenue | $102,000 |
| Cost of goods sold, net of returned goods | ($40,000) |
| Advertising | ($18,000) |
| Fulfillment | ($9,000) |
| Processor fees | ($3,000) |
| Other operating costs, including required labor | ($12,000) |
| Illustrative operating profit | $20,000 |
Check inventory and customer acquisition together
Inventory purchases are not automatically the cost of goods sold in that month. Reconcile units and costs using opening stock, purchases, sales, returns and closing stock. Investigate freight and duties, damaged or obsolete products, supplier deposits and goods in transit. Ask who will independently verify stock quantity and condition.
Then compare sales and advertising by month and channel. Did the seller reduce spending just before listing, or rely on a promotion that will not continue? Check repeat purchases, refund timing, product concentration and advertising invoices. A high reported return on advertising does not account for every cost of running the business.
Find what depends on the seller
List the owner’s tasks and include the cost of replacing necessary work. Identify dependence on particular suppliers, creators, products and sales channels. Confirm account and contract transfer requirements directly with the relevant platforms and advisers rather than assuming access comes with the purchase.
Bring unresolved differences to the seller before relying on adjusted earnings. Keep a separate cash forecast for inventory replenishment, reserve releases, supplier payments, taxes and financing. Reported profit and cash needed after closing answer different questions.
Sources and further reading
- Shopify: sales report definitions
Platform gross sales, net sales and sales reversal definitions. These are report definitions, not a substitute for an accounting reconciliation.
- Shopify: payouts and transaction reporting
Payout timing, fees, transaction reporting and reserves. The numerical examples above are fictional, not Shopify fee or reserve terms.