4 Pro Tips for Finding out your True Profit Margin on Amazon
In my previous blog post I have talked about finding out your true product cost. In this blog post I would like to dwell more on things that affect your profit margin on Amazon, as well as provide you with a handy spreadsheet you will find very useful on your FBA journey.
Starting, I’d like to stress once again how important it is to know your numbers when you are in any kind of business: you need to know what’s going into the process and what’s left over after it’s all done. If you are selling online, and especially if you are selling on a big platform like Amazon, it can be tricky sometimes to figure out how much profit you are actually making, because there are so many different factors that go into your cost. If you skipped my previous blog post, be sure to check that out, where i talk about all of the factors that go into determining your product cost.
It’s very important to look at the process from start to finish. There are some things that affect product specifically (labeling, packaging, shipping product to Amazon, the fees that Amazon charges you, etc.), however there are ton of other factors, that you might not be thinking about, that however are essential part of your e-commerce business:
- How much does it cost me to pay my designer to come up with the label?
- How much am I spending on my email auto-responder service?
- How much does my website cost me monthly?
- What resources am i dedicating to a customer service person?
- How much am i spending on an employee, who’s helping me manage my business?
- What are my legal costs?
- What are my utilities?
- How much space in my house am i dedicating to my e-commerce business?
It’s not enough to just look at your payouts from Amazon and say: ‘’Gosh, I’m doing very-very well’’, or ‘’Gosh, i am barely making my ends meet’’. A big part of success is seeing the whole picture and knowing your numbers.
- Keep a record of any recurring charges. Create a spreadsheet for each business if applicable, and then combine them to get a general picture. You will be amazed of how much you are being nickeled and dimed by all these recurring charges. Some of them are real time savers and essential, however you may find some that are not important and can be cut, if you put all services in the list.
- Try linking all your recurring charges and essential business charges straight to your bank account, instead of the credit/debit cards. Point being – cards expire. Imagine what a problem it can be if several cards expire at the same time, both time-wise and money-wise. It does take a little bit more time to setup, as you have to lookup your account information, but it is safer business-wise. This may save you so much time and headache in the future.
- Create a spreadsheet to help you organize and understand the expenses and profits associated with your Amazon FBA products.Track each product separately to understand your profit margins clearly. Get proven customizable spreadsheet from us and join hundreds of happy Amazon sellers who already use it to keep track of profit margin on each product, ordered from supplier.
- Create a spreadsheet to keep track of all your business expenses or use any software (HelloProfit), that will let you get insight of yourAmazon business when it comes to profitability. Keeping track of your business expenses and profit brings you to a whole new level, when you can truly start to understand your business, see the whole picture, and scale. Understanding all your expenses, you can understand youractual profit. This is truly an eye-opening experience.
It is so important to start with the end in mind, and to do things the right way from the beginning. This will prevent you from doing so many mistakes. Regardless of how you have been doing it, let today be the day when you plant your flag in the sand and say: ‘’No more, I’m going to finally get a handle on what true expenses are for my Amazon business!’’
Use the spreadsheet below to organize and understand profit margins on your specific FBA shipments. It takes into account all possible expenses product bears before being sold on Amazon.