0
2407

# Calculating profit in to ebay sales with VAT

what is the mathematical equation in the correct order to calculate profit on ebay sales.

• ### Has this happened to a client of yours?

Thank you in advance if you can help. what is the mathematical equation in the correct order to calculate profit on ebay sales. Ebay wants us to include free delivery, I would like to look at 20% profit but might have to look at the figures first. as an example.

Item cost       £152.56

Delivery       £19.99+VAT

Ebay Fees    10%

Paypal Fees  2.5%

Many Thanks James

### Replies

12th Jul 2018 18:48

If you are struggling with that then I would strongly advise you to take professional advice as soon as possible.

You don't mention whether you are VAT registered (presumably are?) and whether "item cost" is VAT inclusive or exclusive. Those are two fundamental points in starting to compute your answer.

Thanks (0)
By elbow72
12th Jul 2018 18:58

Hi, Yes I am VAT registered. The Item cost is the basic cost not including VAT.
The reason I am asking is because it seems like there is a lot less profit on ebay, It is a huge market and after looking at companies selling similar items I would like to know if it is worth a go. But what does confuse me is the order of what to charge.
Regards
James

Thanks (0)
By SXGuy
12th Jul 2018 21:24

I can't comment on what you intend to sell and what you think your margins are. But a good starting point would be to work out what it costs you to sell an item, what you can sell it for, the difference is your profit. Excluding vat of course.

What I can say is, the few clients I've had who sell solely on ebay have walked away with a loss because any profit margin they had was eaten up by ebay and PayPal fees.

On top of this a high turnover meant they had to register for vat, they couldn't Increase their margins because other sellers would be cheaper so in the end it was costing them money every time an item was sold.

Don't go in to it lightly.

Thanks (1)
13th Jul 2018 10:32

It's complex because the fees are a function of themselves so you need to either use the sum of a geometric progression or, more simply, Goal seek in Excel.

The answer to the specifics above is an SP of £318.55 inc VAT on the following assumptions:
The 20% profit is meant to be a margin rather than a mark up
The fees are charged on the gross SP
The 20% profit is struck after fees and costs
All VAT incurred is recoverable

Costs £172.55, Fee £39.82, Margin £53.09

Basis of equation:
Raw SP =Costs/(1-margin)*(1+VAT)
+SP to cover fees=Raw SP*Fee rate/(1-margin)*(1+VAT)*(1-(Fee rate/(1-margin)*(1+VAT)^20/(1-Fee rate/(1-margin)*(1+VAT)))

The power of 20 is picked at random, 5 is probably adequate.

Thanks (0)
By elbow72
to paulwakefield1
16th Jul 2018 21:29

Hi Paul, I think your answer was supposed to help but it made my head spin and then made me laugh. Thank you very much for taking the time to answer. Its easy with a bricks and mortar store, just double everything up stick the vodka and tonic on top and off you go. Ebay is a totally different animal were margins are tight but if you get it right you can do okay

Thanks (0)
to elbow72
16th Jul 2018 21:40