Calculating profit

[egglesdtp]

Accounting was never my strong point, but I have been trying to work out how to calculate my profits. I don't have a shop, and I sell items from around the home (so no buying costs as such). Average item price is $10.

Item price + postage (cost to buyer) = A

Actual postage cost.= B

FVF on item = C

FVF on postage = D

Paypal fee = E

The formula I have come up with is as follows: A - B - C - D - E = profit.

Percentage profit per item = profit /  item price x 100

I have worked out that most of my % profit is in the range of 75% to 85%. Does this sound about right?

There is nearly 10% difference in profit between a $10 item posted in a 500g satchel (~85%) and a $10 item posted in a 3kg satchel (~75%) as the profit is nearly $1 less due to the higher postage FVF, Paypal fee and I make a slight loss (7 cents) on the actual cost of postage of a 3kg satchel. But if I increase the postage charge by 50 cents, I actually would make a loss of 12 cents, so my current charge on a 3kg satchel is the one where I make the least loss on actual postage cost balanced by the ebay FVF on postage.

[digital*ghost]

---

@egglesdtp wrote:

 But if I increase the postage charge by 50 cents, I actually would make a loss of 12 cents, so my current charge on a 3kg satchel is the one where I make the least loss on actual postage cost balanced by the ebay FVF on postage.

---

If you're charging actual cost ($13.40), between eBay and PayPal the fee percentage on the postage charge would = $1.68 (this is excluding the PayPal flagfall, which would be paid regardless of postage charge), leaving you with $11.72. 

If you increase the charge by 50c to $13.90, eBay/PayPal will take the same percentage of that 50c, but you'd still be left with more to pay the postage, not less.

i.e. The fees would amount to $1.74, so 6c more, so they only get an additional 6c from your extra 50c, leaving you with the remaining 44c, or $12.16 from the $13.90 charge, and the same principle would apply no matter what your actual postage charges are. 

(NB Based on 9.9% FVF and 2.6% PayPal fee). 

[egglesdtp]

It's a little more complicated regarding postage, as I buy my satchels in packs of 10, which means cost per satchel is $12.73. I charge $13.50 for postage, which means with the postage FVF of $1.34, the postage cost to me is 12.73 + 1.34 = $14.07 (disregarding the PP component), which means I lose 57 cents, not the 7 cents I mentioned (I told you accounting was not my strong point).  If I charge say $14.00 postage, then the FVF becomes $1.39, and the postage cost to me is $14.12. So then I only lose 12 cents. However, I wonder if raising my postage cost to $14 will reduce sales, which are poor enough as it is.

I've just checked out what others charge for 3kg satchels by looking at women's boots (as these are more likely to weigh over 500g). It seems to vary between $13.40 and $15, with the majority around the $14 mark, so perhaps from now on I will start charging $14.00 for a 3kg satchel.

But I would still like to know whether others are getting the same sort of % profit I am i.e. between 75 and 85%.

[wendshees-rocks]

I bought an item the other day that was posted in a bag but it wasn't a prepaid satchel. Actual cost was I think $14.10 and the seller charged me $17, which was for 6 items. I was more than happy with that cost as he'd included a small handling fee for each item and covered his fee costs.

[digital*ghost]

---

@egglesdtp wrote:

It's a little more complicated regarding postage, as I buy my satchels in packs of 10, which means cost per satchel is $12.73. I charge $13.50 for postage, which means with the postage FVF of $1.34, the postage cost to me is 12.73 + 1.34 = $14.07 (disregarding the PP component), which means I lose 57 cents, not the 7 cents I mentioned (I told you accounting was not my strong point).  If I charge say $14.00 postage, then the FVF becomes $1.39, and the postage cost to me is $14.12. So then I only lose 12 cents. However, I wonder if raising my postage cost to $14 will reduce sales, which are poor enough as it is.

---

Ah, ok, I misunderstood your first post as I thought you were working out that charging the lower price means a lower gap between what it costs and what you get.

In terms of whether raising from $13.50 to $14.00 will affect sales, I would try raising to $13.95. Everyone (incl. buyers) does know that it's virtually $14.00, but the two will create different impressions despite that. 

I can't really answer re: percentages, but for what it's worth, my eBay / PayPal fees are currently running at 12-14% on average, (or in other words, I get 86-88% of revenue after eBay and PayPal fees), but my costs are very different. 

[egglesdtp]

---

@digital*ghost wrote:

---

Ah, ok, I misunderstood your first post as I thought you were working out that charging the lower price means a lower gap between what it costs and what you get.

In terms of whether rasing from $13.50 to $14.00 will affect sales, I would try raising to $13.95. Everyone (incl. buyers) does know that it's virtually $14.00, but the two will create different impressions despite that. 

I can't really answer re: perccentages, but for what it's worth, my eBay / PayPal fees are currently running at 12-14% on average, (or in other words, I get 86-88% of revenue after eBay and PayPal fees), but my costs are very different. 

---

---

That was me who confused the issue as I had worked out the wrong figures.  I think you are right raising postage to $13.95 as it doesn't sound as much as $14.00.

I wish my fees worked out to be 12-14%.

[davewil1964]

If you buy eBay satchels and use eBay labels, you would pay a max of $12.05 (plus FVF).

As you are selling personal items and not counting purchase price, your percentage profit is infinity.

You're correct about the accounting skills, but.

[clarry100]

To track profit/loss for tax purposes I have created an Excel spreadsheet with multiple tabs (worksheets) across the bottom.

The worksheets in the various tabs keep track of our total sales (gross income) and then all the various expenses incurred in running the business. Things like fees, postage, stock purchases, allowable household expenses (pro-rated per floor usage space) phone/internet (pro-rated), assetts costs and various other bits n pieces related to the day to day running of the business.

I have put a few graphs here and there so we can see trends on some of the elements.

There is a main summary sheet up front where all the various tab sheet data is rolled up to a summary page, this what our tax accountant needs each tax year.

I went and spoke with my tax accountant about what kind of records to keep and how/if it might be an allowable expense. Works very well for me and is qiuite simple to maintain.

[egglesdtp]

Clarry - I don't sell anywhere near enough to have to worry about declaring my hobby income for tax purposes. And as I don't run this as a busoness, I do not count allowable household expenses (pro-rated per floor usage space) phone/internet (pro-rated), assetts costs and various other bits n pieces related to the day to day running of the business.

But I so dislike the ebay grab at a fee on postage, particularly when my postage costs are so close to my item price, that I decided to work out the tipping point between what I charge for postage vs what I actually pay plus the postage FVF. This is not taking into account the Paypal fee, as this varies with item price.

I discovered that if I charge $8.75 or more for a 500g satchel, and $14.25 or more for a 3kg satchel, I break even. That is the ebay FVF on postage is covered by my postage charge. If I also had to cover the component of the Paypal fee on postage (now there's an example of double dipping) I would have to add around half of the 56 cents I pay on a $10 item. This means charging $9.00 for a 500g satchel (which is what I currently charge) and $14.50 for a 3kg satchel (which is $1 more than my current charge).

[lyndal1838]

You would have a hard time convincing the ATO that all those clothes are your own that you are selling...in all different sizes.

I think you would be deemed to be running a business.   In any case, you should be declaring all income to the ATO even if you have no tax liability.