Top Profitability Metrics for Business to Consumer (B2C) Businesses

Profitability is more than just sales—it's about how well your business manages costs and serves customers efficiently. For B2C businesses, where volume and returns fluctuate quickly, tracking the right metrics is key to understanding what’s actually driving (or draining) your bottom line. 

Here are five essential profitability metrics every B2C business should monitor regularly: 

1. Gross Profit Margin 

Definition 

Gross Profit Margin shows how efficiently your B2C business delivers its products or services, before accounting for overhead or admin costs. 

Why It’s Important 

It helps you understand if your cost of production, delivery, or labor is leaving enough margin to cover other expenses and turn a profit. 

Formula

Where to Find It

• Revenue and Cost of Goods Sold (COGS) are listed on your income statement. 

Example

If your revenue is $100,000 and your COGS is $60,000:

Interpretation: You’re earning $0.40 in gross profit for every dollar of sales—a solid margin depending on your industry. 

2. Net Profit Margin 

Definition 

Net Profit Margin reflects your business’s overall profitability after all expenses—including overhead, taxes, and interest—are deducted from revenue. 

Why It’s Important 

While Gross Profit Margin shows production efficiency, Net Profit Margin reflects how well you manage your entire business, including admin, rent, payroll, and marketing. 

Formula

Where to Find It 

• Net income is at the bottom of your income statement, after taxes and non-operating costs. 

Example 

If your net income is $12,000 and your revenue is $100,000:

Interpretation: Your business keeps 12 cents of every dollar earned after all expenses are paid, and 10-20% is average.

3. Inventory Turnover Ratio 

Definition 

The Inventory Turnover Ratio measures how quickly your business sells and replaces inventory within a certain period. 

Why It’s Important 

A higher turnover rate indicates you’re moving inventory efficiently, which frees up cash and reduces holding costs. Low turnover can lead to overstocking and tied-up capital. 

Formula

Where to Find It 

• COGS is on your income statement. 
• Average inventory is calculated by averaging your beginning and ending inventory from your balance sheet. 

Example 

If your COGS is $120,000 and average inventory is $30,000:

Interpretation: You turned over your inventory 4 times during the year. The higher this number, the better—assuming you’re not running out of stock.

Boost your Small Business with our list of key APIs to track.

4. Refund & Return Rate

Definition 

Refund & Return Rate tracks the percentage of orders that are returned or refunded. 

Why It’s Important 

Returns reduce profit, increase handling costs, and can signal problems with product quality, fulfillment, or customer satisfaction. 

Formula

Where to Find It 

• Order data and return counts are found in your e-commerce or POS system.

Example 

If you had 100 returns out of 2,000 total orders:

Interpretation: A 5% return rate might be normal for apparel but high for consumables. Monitor this metric by product category and time period. 

5. Average Order Value (AOV) 

Definition 

AOV shows how much, on average, a customer spends per transaction with your business. Why It’s Important 

By increasing AOV, you can boost revenue and profitability without acquiring more customers—making it a powerful metric for growth.

Formula 

Where to Find It 

• Revenue and order count are found in your e-commerce dashboard or sales reporting system. 

Example 

If your revenue is $50,000 and you’ve had 1,250 orders:

Interpretation: On average, each customer spends $40 per purchase. Consider upselling, bundles, or promotions to boost this number. 

Bottom Line: Measure What Matters 

Tracking profitability isn't just for investors—it’s how you understand YOUR business and plan for growth. For B2C businesses, the five metrics above offer a clear picture of how well your products sell, how efficiently you operate, and how healthy your margins are. 

Want to make these numbers work for you? LedgerFi provides specialized bookkeeping and reporting for product-based B2C businesses, so you can make confident, data-driven decisions. Let’s talk!