Working out exact profit on an item
Hi,
Ive searched for the answer to this question but still cannot find a definite answer.
I’m a VAT registered business trying to sell on amazon but I’m struggling to figure out if I am making a profit or not.
The item I am selling for £54.99 and it costs me £28.00 excluding VAT with the amazon fees of -£8.41 and postage and packing of £3.70 excluding VAT.
I have used several different methods of working it out and im not sure which is the correct one and what is the correct figure. Could someone please help me, it would be greatly appreciated.
69 replies
Seller_sFEUMUfeW5484
A very rough calculation and I think you’ll be making about £5.70. But other than postage costs and Amazon fees, you might want to add in a small margin to cover lost in post, damaged items that are returned, A-Z claims etc, as you would be doing normally now anyway.
What amount did you come up with?
Seller_esvgLzKXw2YAl
It’s not that difficult to work out a gross profit.
Just remember to do your sums pre vat rather than including it.
Selling price, less cost price, less amazon commission, less FBA fees (postage).
Then allow for your cost to send in etc, storage and so if used.
Seller_DTufFoxJuMU0M
Did you account for packaging as well?
Agree with Little Shop - its easy to factor in a per item cost, but theres also £25 monthly fee, if you FBA you have to get items there, storage, electric, rent, rates/council tax, insurance, phone/broadband etc…
While they aren’t in the straight cost to sale you do have to factor it in somewhere along the line, you need to make sure you are making enough profit to cover all your expenses, and if you only sell 3 items a day you need to make more profit on those 3 items than if you were selling 30… its very relevant…
Seller_Ub7LwJvywnrm2
It may or might be worth using the Amazon seller app as that app has a fees calculator, I use that app all the time you can get it on iPhone and etc, It will give you a better sum of how much to charge?
{I am making £20.00 Profit Just on 1 Hamster Cage} Selling at £55.00 With free Delivery
Seller_Ub7LwJvywnrm2
The £20.00 Profit is how long it took me to get the stock in the first place, how much it cost for fees shipping etc… I added it all up to make money so £20.00 is my profit after all that?
Seller_F7MyYCspln645
I agree with some of the other comments here. There are also those other costs of packing time and the packing itself. Also now we have to allow for Amazon’s monstrous decsion to allow returns willy-nilly and irrespective of the condition in which it has been retunred and with YOU funding the return postage.
Amazon are just too greedy. Useful for clearing some stock that has not sold, but little else.
Seller_gSzao5tsKB0Ds
In summary, you are making some profit, but not that much in comparison to your outlay. You need to spend over £5,000 to make around £500 (probably more like £450 with other costs not catered for). If you need say £2,000 / month, this means your outlay would be over £20,000 / month. Too much imho.
Also, do you use STK and/or BBP etc. These subscriptions could total £50 to 60 / month. You would need to sell 10 or 12 of your products just to clear these costs too…
Seller_DJwE1RXTpAHPh
if using markup (e.g. you want to make 10% of the cost-value of the item as profit):
((item cost-value * (1+(markup decimal))) + (sum of all fixed costs)) / (1-(sum of variable cost decimal values))
if using margin (e.g. you want 10% of the sale price to be profit):
(sum of all fixed costs (inc. item cost-value and postage cost-value)) / (1-(sum of variable costs and margin decimal))
so using these with your figures, giving a 15.3% fee rate and a 20% VAT rate:
10% markup (on goods cost-value only): ((28 * 1.1) + 3.7) / (1-(.153+(.2/1.2))) = 50.71 sale price with 2.8 profit
10% margin: (28+3.7) / (1-(.153+(.2/1.2)+.1)) = 54.62 sale price with 5.46 profit
-always use net ‘cost-value’ figures
-do not use the published VAT rate as a decimal in calculation. instead use (published VAT rate / (1 + published VAT rate)) e.g. instead of .2 you use .2/1.2 (gives .166667)
-you can put a replacement rate in as a variable decimal value, to cover losses and misdelivered goods, instead of covering it with your markup or margin, because this will vary by postal service and destination
-remember Amazon has a minimum fee value per item, currently at £0.25 for Amazon UK. So you need to toggle the formulas to account for that if needed, but the easiest way to do it is put .25 in as a fixed cost and remove the fee variable value, if you know the total fee will be under .25, or you can actually pay them the .25 even if it’s like 50% of the sale price, if you really want to use a slightly more complex calculation
Seller_UMbBXJIwisVCH
Hello,
We are using “Fulfillment by Amazon Revenue Calculator” and it really helps a lot.
Regards
Seller_2tFFZMJtc4QEf
To keep track of things day to day I use Shopkeeper, you can do it with an excel if volume is low.
