Work out profit first
Use actual costs where known and realistic estimates where you are still deciding whether to buy or list.
RESELLER FINANCE · PRACTICAL GUIDE
How to calculate your reseller profit margin.
Profit tells you what is left after costs. Profit margin shows that profit as a share of the selling price, making it easier to compare items with different prices.
THE TWO FORMULAS
Margin and markup are different
Estimated profit = selling price − stock cost − applicable fees − postage you pay − packaging − other direct costs.
Profit margin (%) = estimated profit ÷ selling price × 100. Markup instead compares profit with the stock cost. They answer different questions, so label the number you use and compare like with like.
Calculate the margin
Divide estimated profit by the selling price and multiply by 100 to get the margin percentage.
Compare fairly
Use the same cost rules for each item, otherwise the percentages can be misleading.
WORKED EXAMPLE
From a £40 sale to a margin
Imagine an item sells for £40. It cost £18 to buy, with £4 in applicable selling costs, £3 postage you pay and £1 packaging. Estimated profit is £14. Divide £14 by £40 and multiply by 100: the estimated profit margin is 35%.
These figures are for illustration only. The result is before any other overheads, tax or costs not included in the example. Your actual margin will depend on your transaction and accounting method.
CHOOSE A TARGET
Use a target margin as a guide, not a guarantee
Different categories have different sourcing costs, turnover speeds, return risks and levels of competition. A high margin on an item that never sells may be less useful than a lower margin on stock that sells consistently. Consider the amount of cash tied up in inventory, how long it takes to sell and the likely costs of holding or returning it.
Before purchasing, estimate the net proceeds using the current platform fee and delivery details, then decide whether the potential profit is worth the risk. Review real results over time and adjust your buying criteria as you learn.
KEEP YOUR RECORDS CONSISTENT
Build a reliable view of your business
Record the cost when stock is purchased
Include applicable selling and fulfilment costs
Separate completed sales from unsold stock
Log overheads and business expenses separately
Compare margin and total profit together
A simple calculator can help with individual decisions. Consistent stock, sales and expense records help you understand performance across the whole business. This guide is general information, not tax or accounting advice.
MAKE THE NUMBERS USEFUL
Know what each sale really returns.
Estimate profit for a product, then track your stock and expenses as your resale business grows.