Profit Calculator’s Estimated Profit Margin % and Return on Cost of Goods Sold

BQool will explain what is the ROI% and how you can use this calculation to set perfect Min and Max prices using a repricer. We will go through some real products and calculate the best ROI in order to prevent selling for a loss. Lastly, Marco will show how to successfully set the same ROI for multiple listings by using Bulk Action: Profits, ROI and Profit Margin feature.

There are two common ways to estimate profitability in the business world – one is to consider the profit margin, and the other is to calculate Return on Investment. Profit margin % is calculated by breaking down the item price into cost and profit, whereas ROI focuses on the investment value of a product.

• Est. Profit Margin % is calculated based on the offer price (Min or Max)

Our current formula: Est. Profit Margin % = Profit (offer price – total cost) / Sale Price

Example: You purchased an item for $45, and it was sold at $100. After taking into account the product cost ($45), assumed FBA fee of US$10, and 15% Amazon Referral Fee ($15), your net profit margin is 30%, which is calculated by $30 / $100.

Now if you were able to sell the product at $500, your profit % will NOT be 150% (30% x 5). Since the Amazon Commission (%) is based on the Selling Price, the higher the price the greater the fee you need to pay to Amazon. Thus, your new cost is now $130 (product cost $45 + FBA fee of US$10 + commission $75). The new Profit % is now 74% (($500 – 130) / $500).

• Return on cost of investment (ROI) 

If you wish to set your Min or Max price based on a percentage of your actual cost, then you are looking to calculate ROI, or in other words, Markup % or Returns on the Cost of Goods Sold (COGS).

Formula: Markup % = (Est. Profit  / Product Cost＋Additional Cost) X 100

Example: You bought a product at $45 and you decided to price the item at $100. If you do not consider all other cost, the Return on the $45 is 122.2% { ($55 / $45 ) X 100 }.

In summary

In both examples the product was sold at $100 and purchased at $45

Est. Profit Margin % = Est. Profit (offer price – total cost) / Sale Price =

(Min Price $100 - Product Cost $45 - Amazon Referral Fee $15 - FBA Fulfillment Fees $5.40 ) / Min Price $100 = $34.60 / $100 = 34.6%= 35%

ROI = (Est. Profit  / Product Cost+ Additional Cost) X 100 = ($34.60 / Product Cost $45 ) X 100= 76.88% = 77%