Working Out If Your Product Is Profitable

Whenever you start consider starting up a business, the first thing you need to take into account is whether or not it will be profitable. You don't want to put all your time and effort into developing something that in the end will cost you more than you'll earn.

When you’re importing, making sure that your product is profitable is a pivotal step before you import because throughout the process of buying your goods and reselling them on there are a lot of costs that will be additionally piled on. Working out the total unit price of your goods in advance is absolutely essential to determining whether they’re going to be worthwhile to sell and whether your business is operating under a viable business model.

However, many people aren’t aware of what costs they need to factor in to when working out the unit price, so today we’re sharing a few of the costs that you need to take into consideration.

  1. Unit Cost

    The cost per unit that your supplier provides you with is naturally the starting point of how much one of your products will cost you overall. This is often the cost that most people consider to be their final unit cost – but be wary because it is most definitely not.

    On occasion there may be extra costs to take into account for example if you use any additional services to find or verify the quality of your goods (such as sourcing agents or factory quality inspectors) factor these into the price.

  2. Shipping Costs

    The cost of shipping is always a large expenditure; if you’re paying through-the-roof rates for couriers, you may want to look into sea-freight to try to lower the overall cost. If you would like to compare the three different methods and their costs, we’ve written an informative post about it here.

  3. Customs Costs

    Customs Clearance can be another massive fee. HMRC charges Duties and Taxes that can sometimes cost as much as the shipment itself! If you know all your shipment details, we can actually help you work out your customs fees – and we can clear them on your behalf so that you don’t have to worry about it.

  4. Storage Fees

    Although a little more difficult to predict as you can’t be sure how long your products will remain in storage for, it is helpful to have an idea of how much your storage will cost you.  Perhaps try to forecast the speed of your sale.  If you’re paying for a warehouse to hold your stock then the cost of the product to you increases each week that the goods don’t sell, especially if your products are large.

  5. Fulfilment (Packaging and Shipping)

    Your packaging and shipping is another expense to factor in – especially if you’re using a third party Fulfilment Service (such as Amazon FBA). This can eat into your profit margin.

  6. Marketplace Selling/Marketing Fees

    A lot of marketplaces charge for selling on them – Amazon being an example of this. If you are planning to mainly sell through a marketplace, then it is worthwhile to research how much the marketplace selling fees will set you back.  If you are not selling on a website like Amazon or eBay then you may incur costs to get your product to market, either by marketing or other means.

Taking all of these costs into account should make it easier for you to work out how much your total cost per product is. From there, you can work out how much you’re selling it for and whether the profit will be worthwhile. If your profit margin is slim or non-existent then maybe your current product isn’t best business decision.

If you would like to find out more about the shipping costs and how using sea freight could reduce them, feel free to get in contact with us or receive a free quote.

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