Knowing your true profit margin — after platform fees, not just product cost — is the difference between a sustainable business and one that's secretly losing money on every sale.
Quick answer: Profit Margin % = (Sale Price − Total Costs) ÷ Sale Price × 100. Always include platform fees, not just product cost, in your "Total Costs."
Profit Margin % = (Revenue − Total Costs) ÷ Revenue × 100
Total Costs = Product Cost + Shipping + Platform Fees + Payment Processing
| Sale Price | Product Cost | Platform Fee | Profit | Margin |
|---|---|---|---|---|
| $50 | $15 | $5.10 (eBay) | $29.90 | 59.8% |
| $50 | $15 | $5.06 (Etsy) | $29.94 | 59.9% |
| $50 | $15 | $1.75 (Stripe) | $33.25 | 66.5% |
A seemingly small fee difference compounds at scale. Selling 1,000 units/month at $50 each, the difference between a 10% fee platform and a 3% fee platform is $350/month — $4,200/year in lost margin from fees alone.
Most successful e-commerce businesses target 40-60% gross margin before operating expenses. If your calculated margin falls below 30% after platform fees, consider raising prices, switching platforms, or reducing product costs through better sourcing.