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 (6)
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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.
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.
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.