drop ship guide

How Do I Calculate My Profit From Drop Shipping?

This is one of those things that obviously you must know before you start your drop shipping business.

 



 

One the basic level, for your drop shipping business, you charge one price and pay another.

And unique to the drop shipping business, you get paid by the customer first, then you pay supplier. You keep your profit up front.

Or, the customer pays the supplier and you get paid a commission.

So once you find a product and the price at which you can sell it, you can calculate your gross profit.

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But there is a bit more to it.

Even though you are drop shipping, you have fixed and marketing costs to contend with.

You must always remember that even though you are drop shipping, your business is marketing. Yes there are many free ways to market your products, but there will be expenses.

And your backoffice costs such as your accounting, internet connection, web site host and other web services are everpresent.

When you examine these costs, you may find that you may make more money by selling a product with a 10% commission than you will by drop shipping one with a 50% markup.

So as part of you profit calculation, you need your marketing action plan to understand those costs.

Only then will you be able to calculate your profit.

I will say, that as a general rule, if you set up a fully automated drop shipping system, you will find acheiving profitability easier.

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