Understanding the profit or margin on unsold inventory can offer valuable insights into your pricing strategy and potential earnings. While this analysis assumes that all inventory will sell at full price, without discounts, which isn’t always the case, it’s still a useful way to gauge whether you're on track to meet your profit goals or if adjustments are needed.

By using a few targeted calculations, you can assess the potential profit and profit margins of your current inventory based on its cost and retail value.

Preparing the inventory report

To begin, open a Dusty Inventory report, which is essentially an Inventory report with specific filters. To turn it into a full Inventory report, you’ll need to remove two filters:

1. Open the Filters panel.
2. Remove the filters: Is Dusty is Yes and Quantity on Hand is greater than 0.
   
3. Click Run to rerun the report.
   

   

After the filters are removed, you’ll get a true inventory report and have a complete view of your inventory.

Adding measures

Profit is a function of Total minus Cost. To calculate profit, you’ll need both the Total Cost, which is already included in the report, and the Total Retail Value. 

For the Total Retail Value, navigate to Item Metrics > On Hand > Total Retail Value, add it to the report, and run it.

To streamline the data, click the gear icon (Settings) for Days Since Sold and Days Since Received and select Remove.

This simplifies the report to include only the data needed for profit analysis.

Calculating profit potential

Profit is the Total minus Cost. Now that your report includes both cost and retail value, you can calculate profit potential using a table calculation.

1. Navigate to Custom Fields > Table Calculation.

   

2. Search and add Total Retail Value.

   

3. Include a subtraction symbol to the calculation.
4. Search and add Total Cost.
   

   

5. Optionally, set the number type to your desired currency.
6. Optionally, add a clear title for the calculation, such as Profit Potential.
7. Save the calculation.

Your report now includes a field that displays how much line profit you could make if you sold your entire inventory at full price.

Calculating potential profit margin

Now that you have your profit potential, you can calculate your potential profit margin. Profit margins are the profit of a sale compared to the full retail price of the sale.

1. Navigate to Custom Fields > Table calculations.
2. Click the gear icon (Settings) beside Profit Potential and select Duplicate the Profit Potential calculation.

   

3. Then, edit the new calculation by clicking the gear icon (Settings) and selecting Edit.

   

4. Add parentheses around the profit formula to maintain the order of operations.
5. Include a forward slash and divide the result by the Total Retail Value.

   

6. Change the number type to Percent.

7. Optionally, rename the calculation, for example, Margin Potential.

8. Save the calculation.

The results will display in your report.

These are the exact formulas used:

• Profit Potential:
  ${cl_item_facts.retail_value} - ${cl_item_facts.cost_value}
• Margin Potential:
  (${cl_item_facts.retail_value} - ${cl_item_facts.cost_value}) / ${cl_item_facts.retail_value}

These calculations help you understand your inventory’s earning potential.