Ecommerce Profit Margin Calculator
Calculate the best selling price for your products to optimize profits and retain customers
Pricing your products can be tricky. The key is taking into account ALL of your variable costs and understanding your true cost of sales. If not, each additional sale may actually cause you to lose money - sounds crazy right?
What's profit margin and why does it matter for my business?
Profit margin tells you how profitable a product or a business is. It’s generally expressed as a percentage; the higher the number, the more profitable the business. It's basically telling you how much cents of profit you are getting for each dollar of sales income.
How do I calculate the gross margin percent?
Gross profit is the profit from sales. To calculate it, subtract your cost of goods sold (COGS) from your net sales (gross revenues - returns, allowances, & discounts). Once you have your gross profit, divide this number by your net sales and multiply this by 100 to calculate the gross margin in a percentage of your sales.
Finaloop's profit margin calculator will do this for you. Let's take a simple example: Net sales is $120 COGS is $30
- $120 Net sales - $30 COGS = $90 Gross profit
- $90 gross profit / $120 Net sales = $0.75 Gross profit margin
- $0.75 Gross profit margin x 100 = 75% gross margin percent
What is a good profit margin?
A good profit margin varies by industry and depends on many factors such as the costs of sales, competition, and your target market. As a general rule of thumb, a 10% profit margin is average, 20% profit margin is strong, and a 5% profit margin is considered low.
Read more about it here.
Ecommerce Pricing Calculator
Use our profit margin calculator to find the sweet spot between increasing your profits and keeping your customers coming back for more.
How does our ecommerce profit margin calculator work? It's as easy as 1,2,3 (literally).
Step 1 - Enter your cost details
Add your cost of purchasing or producing the item and shipping-out costs. Add the sales tax rate and any shipping income so you get a big picture view of your profit.
Step 2 - Enter your merchant fees
Merchant fees can be made up of variable fees, based on a fixed percent (e.g., 2.9% per transaction) and fixed fees (e.g., $0.30 per transaction). You can choose your payment processor from the drop down list or, pick the 'Other' option to enter the applicable fees.
Step 3 - Enter your target profit
A target profit margin can vary based on many factors, including your target market, industry standards, and competitor pricing. Your profit margin, or the amount you want to walk away with from a sale, is usually a percent based on gross margin or a mark-up of the product.
- Gross margin % - This is the percent of your profit margin over your total revenue.
- Mark-up % - This is the percent of your profit margin over the total cost.
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