WHAT IS THE COST OF NOT KNOWING YOUR COSTS?

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"The Ultimate Guide to Accurate Product Costs"

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8. The Ultimate Workshop to Accurate Product Costs & Increase Profitability.

Most sellers understand profitability from a fundamental standpoint. If sales covers your expenses, you are profitable.

Profits equals positive cash flow and, positive cash flow creates your business from redlining. Naturally, profitableness tends to be one of the primary goals of any business owner.

However, what I am about to show you is why sellers like you and me should look beyond a simple profit amount. As the simple profit amount doesn’t indicate the why's and how's that makes the business profitable.

Analyzing key metrics is the pulse of any business. KPIs help determine whether their company is healthy, and profitability, and is sustainable. By calculating and comparing metrics, sellers can identify the products that are working well — and those that need attention and/or improvement.

Before we get into the working workshop, we need to discuss some KPIs that are heavily reliant on having accurate Cost of Goods Sold.

As an online seller we are going to be focusing on the product level profitability.

Let's review these profitability metrics:

Return of Investment - (ROI) is a popular profitability metric used to evaluate how well an investment has performed. It is how much it costs to produce and develop a product verus how much profit that product generates. ROI = Net Profit / Cost of the Investment * 100. For instance, if your company spends $15,000 purchasing a product that earns you a profit of $16,000 - your ROI is 107%.
Profit Margin - To find profit margin, divide your gross profit by revenue. To make the margin a percentage, multiply your result by 100. If the margin is 30%, that means you keep 30% of your total revenue. eCommerce profit margins from sales can be calculated by the price you sell your product for minus your Landed Cost (COGS), your Cost per Acquisition (Advertising) and your Cost of Selling (Fees - Shipping to Customer, Referral Fees, Marketplaces Fees)
Per Unit Profit - eCommerce profit per unit can be calculated by the price you sell your product for minus your Landed Cost (COGS), your Cost per Acquisition (Advertising) and your Cost of Selling (Fees - Shipping to Customer, Referral Fees, Marketplaces Fees)
Total Product Profit - eCommerce Total Product Profit can be calculated by the Revenue/Sales of your product for minus your Landed Cost (COGS), your Cost per Acquisition (Advertising) and your Cost of Selling (Fees - Shipping to Customer, Referral Fees, Marketplaces Fees)

Tracking all of these metrics does not have to become your second full-time job. When you have access to this information, you will always know how to effectively ship, receive, and fulfill orders that contribute to a growing ROI and profit margins.

Having an accurate grasp on your Profit KPIs will increase when you empower yourself, and your business, with this process. It is important to track all costs attributed to the cost of the product, as how else will this metrics be accurate.

Understanding your Seller Fees and Advertising is relativity simple, but having a True and accurate per cost requires a little more leg work. Applying effective tools and resources will enable you to add invoices and clearly split costs line by line, SKU by SKU.

As you can see, there can also be a significant difference between the CBM and volumetric weight calculations. The worksheet below will help you understand which calculation to use and when. Applying the wrong calculation to an invoice will undoubtedly cause incorrect costs which will cause (or cost) you in the long run.

The Ultimate Workshop to Accurate Product Costs

& Increase Profitability...

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"The Ultimate Guide to Accurate Product Costs"

Download the free cheatsheet for our resource guide that shows you exactly how you can run your business like a cost-keeping pro.

Frequently Asked Questions

What is a dry container?

Dry containers (DC) are the most used type of container in the world: 90% of goods shipped by sea are loaded in dry containers. The 20-foot and 40-foot cargo containers are made of aluminum or steel and are suitable for all types of cargo. Aluminium containers have a slightly larger payload than steel, and steel dry containers have a slightly larger internal cube.

Dry container size and capacity

The specific dimensions and capacities of dry containers may vary depending on the container manufacturer, the age of the container and the container owner. The specifications listed below are representative of the majority of containers available.

Tare weight /ˈtɛər/, sometimes called unladen weight, is the weight of an empty vehicle or container. By subtracting it from the gross weight (laden weight), the weight of the goods carried (the net weight) may be determined. ... Tare weight is also used in body composition assessment when doing underwater weighing.

What does FCL mean in Shipping

Two of these include Full Container Load (FCL) and Less Than Container Load (LCL) shipping. FCL refers to shipments for which all goods in a container are owned by one party, while LCL involves multiple shippers' goods packed together.

What does LCL mean in shipping?

LCL (Less than Container Load) refers to a shipment that doesn't fill one 20 or 40ft standard container. The container is therefore loaded with cargo from multiple consignees. On arrival at the destination port, the goods are separated at a container freight station.

How is CBM calculated in China?

CBM – cubic meter is calculated by multiplying length, width and height of packages of goods. For example, if the length, height and width of a cargo is 2.3 meters, 1.4meters and 2 meters respectively, the volume of cargo is 2.3 X 1.4 X 2.00 = 6.44 CBM.

How do you calculate volumetric weight for shipping?

Volumetric weight can be calculated by multiplying the length, width and height of a parcel (in cm) and dividing that figure by 5000 (some carriers use a divisor of 4000). You may often find that the price of your shipment is dictated by the volumetric weight of your parcel(s) rather than the physical weight.