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I’m trying to target a specific profit margin. Am I calculating the right things?

My model includes a 3PL. Here’s what I’m factoring in when using a target profit margin to get to a listing price:

  • Wholesale cost of item from supplier
  • plus Cost of shipping to 3PL
  • plus 3PL order fee
  • plus Average shipping cost per weight tier
  • plus Shopify credit card fee %
  • ###### minus shipping charged to customer
  • = COGS

Those seem to be all my variable costs. The tricky part is that I’m planning to charge a flat rate for shipping for each order, baking the rest of the shipping cost into the product. That’s why I didn’t include “shipping charged to customer” as part of the COGS calculation. The remainder of the shipping that is baked into the price is part of it though. Is that right?

Also I added Shopify’s credit card fee before crediting shipping paid because Shopify will charge me for the entire amount paid.

What do you all think? I know that calculating a profit margin varies depending on who you talk to, but is this a decent enough way to do it? I’m primarily using it to ensure I’m setting the right product prices so I have enough margin left over for overhead and profit.

submitted by /u/TheStoffer
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