How to Calculate Your Profit Margins

One of the most important numbers to determine how well your sales are going is to figure out your profit margin. Your profit margin is simply the percentage of your total sale that is profit after all expenses are covered.

I like to keep my total profit margins for the month over 60% because this number is what makes all of my hard work worth my time investment.

First you need to figure out your total profit for the item:

(Sale price + Shipping Charged) – (Shipping Cost + Ebay Fees + Paypal Fees + Item Cost) = Total Profit

Remember the math rule that all work inside parenthesis needs to be done first!

Now that you have your total profit for the item you can figure out your profit margin as a percentage.

Total Profit / (Sale Price + Shipping Charged) = Your Profit Margin as a decimal.

Move the decimal over two places to the right and you have your percentage.

Example: 

You just sold a shirt for $25 and charged $4 in shipping.

($25 + $4) – ($4 + $2.90 + $1.14 + $3)

($29) – ($11.04) = $17.96 total profit

$17.96 / $29 = .6193 which as a percentage is a 62% profit margin

62% is a great sale. Don’t expect this every time but it’s good to focus on items that will keep you above 60% in profit.

On a side note, I always include shipping charges and costs in my calculations because sometimes there is a slight difference between what we charge and what it actually costs.

Your calculations will be different if you offer free shipping or have an eBay store which is a monthly cost and lowers your final value fee.

 

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