Calculating Net Profitability

[steezy410]

Hello Everyone,

I've been ramping up to start listing on eBay again and wanted to ensure I have all bases covered in regards to fees. Someone in my seller group recommended I use a 3rd party eBay fee calculator to estimate my profitability and I wanted to see if there's anything else I should be considering outside of this calculator?

I'm selling apparel so I chose the "Standard" category. It also says that PayPal is factored into this, so it looks like just about everything is covered. Anything I'm missing?

Thank you!

[southern*sweet*tea]

All of these things take AWAY from your profit:

Item acquisition cost

Shipping costs if you use "free" shipping

Paper

Shipping supplies - tape, envelopes, boxes, bubble wrap, etc.

Ink

Ebay fees

Paypal fees

Your pay

Any overhead that you may have such as power, electricity, rent, gas if you go to the PO, gas you use while sourcing...

Did I forget anything?

Take all of the above and subtract it from your gross. That is your net.

[castlemagicmemories]

Whether you are selling used or new clothing, that is a very over saturated category, which means lots of competition.  Profitability is important, but if your prices are higher than most others, sales will be stymied.

[birdsflowersanddogs]

Don't forget taxes if you are going to sell enough.

[femmefan1946]

Your cost should include not just procurement cost, but also packaging for shipment.

And there is no labour cost. I use the local minimum wage per minute and multiply by the number of minutes it takes me to scan, describe, fill forms and upload each item.

If your item doesn't sell within one month, the eBay fees repeat.

The calculation does not allow for the 50 free listings you get each month if you don't have a Store.

Nor does it allow for the reduced cost for listings if you do have a Store. (Note that these are not 'free', and that the more items you have in your Store, the lower your per item listing fee.)

But it does give you a pretty good rule of thumb.

[ted_200]

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@southern*sweet*tea wrote:

All of these things take AWAY from your profit:

Item acquisition cost

Shipping costs if you use "free" shipping

Paper

Shipping supplies - tape, envelopes, boxes, bubble wrap, etc.

Ink

Ebay fees

Paypal fees

Your pay

Any overhead that you may have such as power, electricity, rent, gas if you go to the PO, gas you use while sourcing...

Did I forget anything?

Take all of the above and subtract it from your gross. That is your net.

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Return Requests (legitimate & otherwise)?  That's not part of fees, but returns and shrinkage is certainly in the profitability calculation.

[luckythewinner]

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@steezy410 wrote:

Someone in my seller group recommended I use a 3rd party eBay fee calculator to estimate my profitability and I wanted to see if there's anything else I should be considering outside of this calculator?

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That calculator does simply math to show the profitability for a specific item that includes an insertion fee and sells the first time it is listed. 

Off the top of my head it does not consider store subscription fees, does not factor in free listings, and does not consider how many times the item may need to be listed before it sells. It also does not consider the effect of international sales, the cost of supplies, or factor in any sort of reserve for losses or returns. 

The math for calculating a seller's profitability for an item is quite simple. I can set up a spreadsheet to do it in about five minutes, and include all the pieces that this calculator leaves out. 

[southern*sweet*tea]

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@ted_200 wrote:

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@southern*sweet*tea wrote:

All of these things take AWAY from your profit:

Item acquisition cost

Shipping costs if you use "free" shipping

Paper

Shipping supplies - tape, envelopes, boxes, bubble wrap, etc.

Ink

Ebay fees

Paypal fees

Your pay

Any overhead that you may have such as power, electricity, rent, gas if you go to the PO, gas you use while sourcing...

Did I forget anything?

Take all of the above and subtract it from your gross. That is your net.

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Return Requests (legitimate & otherwise)?  That's not part of fees, but returns and shrinkage is certainly in the profitability calculation.

---

Yep

I forgot the most important thing - self insurance/loss fund!

[m60driver]

That calculator has nothing little to do with profit.  The only way to get at net profit is to run a spread sheet with all expenses.  If you sell enough you could justify using Quickbooks, but that runs a few hundred dollars a year, well worth it if you ever need to generate financial statements for tax purposes.  If you are a micro seller like me you can just do it in your head. 

[femmefan1946]

A couple of sellers have mentioned returns/refunds.

These do happen, and most of them are legitimate, but they are a very small part of your business.

WalMart, which has a pretty .. ummm... interesting clientele, figures their loss to shoptheft and shrinkage at one percent of sales.

That's a useful number, but most sellers find there losses much much lower than that.

Cookie Jar Insurance, which is just tossing a few virtual pennies from every sale into a self-insurance fund for such problems, is usually a small profit centre.

Much cheaper than postal or third party insurance and easier to make a claim from the Cookie Jar than from the post office.

Remember insurance, like shipping, is always paid by the buyer, even if it is not a line item.

[femmefan1946]

@birdsflowersanddogs
Yep.
The best sign you are successful is that you are paying taxes.
If you are not paying taxes, you are not making money.

[ted_200]

That calculator has nothing little to do with profit. 

No, you're right, there's a lot more that goes into it.  It's just attempting to calculate how much of the buyer's total payment you're going to actually receive. 

...shipping, is always paid by the buyer, even if it is not a line item.

Once I get hold of what the calculator says I'm going to receive, I have to pay for the shipping.  I still can't wrap my head around "shipping is always paid by the buyer"... if I opt to go the untracked envelope route at 50¢, vs. the $2.66 for tracking, my buyer doesn't pay any less, and I get to keep the two bucks.  That sounds to me like I'm  paying, whether the shipping was "Free" or not.

[luckythewinner]

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@femmefan1946 wrote:

A couple of sellers have mentioned returns/refunds.

These do happen, and most of them are legitimate, but they are a very small part of your business.

WalMart, which has a pretty .. ummm... interesting clientele, figures their loss to shoptheft and shrinkage at one percent of sales.

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WalMart does not refund return shipping;  they deduct it from the refund. And when a buyer tried to return a phone book instead of a laptop, WalMart can refuse to give the refund.

But for eBay sellers, both of those cases require a full refund of the item price and for the seller to pay cost of return shipping.

Returns and fraud may not be a significant factor for you or for WalMart, but there are plenty of sellers here who feel much differently.

[fuzzface50]

If you need a calculator to see if you are making a profit or not then you are not selling the right widgets or are selling them way to cheap.   🙂 

[18704d]

" If you sell enough you could justify using Quickbooks, but that runs a few hundred dollars a year, ..."

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There are comparable free alternatives, such as Open Office.

Lynn