Before busy season, do a 15-minute margin check

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We’re heading into the busiest selling season. I want you to sell a ton—but also keep the profit. It would be disappointing to crush it in December and see no change in your bottom line.

Here’s a quick method (and example) you can use to confirm your real margin.

This looks a bit technical, but don’t worry, I have an easy-to-follow example. You can do this, it’s important!

But if you need a bit more guidance, or want to press the easy button, I created a spreadsheet to do the heavy lifting for you.

Tip: Start with your top seller. Much of what you calculate will apply to other products.

Gather These Inputs (for one product)

1. Price: the amount you usually sell it for (exclude sales tax).
2. Direct materials: everything that goes into the item, including materials, packaging, labels/inserts, etc. (COGS items only).
3. Direct shipping cost: your average label + packing cost for this item.
4. Platform fees per item/order: Etsy: $0.20 listing fee per quantity sold + 6.5% transaction fee on item price (and on shipping if you charge it). Shopify: skip platform fees here (we’ll pick them up in Admin%).
5. Payment processing: ~3–3.5% of the charged amount.
6. Advertising %: From your bookkeeping, pull up your YTD Profit & Loss report. Add up your advertising expenses. Compute %: Advertising Expenses ÷ Gross Product Sales.
7. Admin %: From your bookkeeping YTD P&L, add up “everything else,” tools, subscriptions, apps, etc.
   • Exclude: COGS, advertising, transaction and processing fees you already counted, and shipping labels (unless you offer free shipping).
   • Compute %: Admin ÷ Gross Product Sales.

Profit Math (Item Only), Then Add Shipping

First, calculate profit on the item (no shipping):

If positive, you’re profitable. If it’s narrow, tweak price, materials, or Ads% before promos.

Now, consider shipping explicitly.

If you charge shipping, remember that platforms often charge transaction and processing % fees on shipping too.

Net shipping = Shipping charged − Label/packing − (% fees × Shipping charged)

Total Profit = Item Profit + Net shipping

Example (plug in your numbers)

• Price: $30.00
• Materials: $8.00
• Etsy fees: $0.20 listing + 6.5% of $30 = $1.95
• Payment processing: 3.5% of $30 = $1.05
• Advertising: 8% of $30 = $2.40
• Admin: 12% of $30 = $3.60

Product Profit = $30 − $8 − $0.20 − $1.95 − $1.05 − $2.40 − $3.60 = $12.80

Profit Margin = $12.80 ÷ $30 = 42.7%

Shipping:

• Shipping in (S_in): $10.00
• Label & packaging (S_out): $8.00
• Fees on shipping (≈ 6.5% + 3.5% of $10): $1.00
• Net shipping = $10 − $8 − $1 = $1.00

Total Profit including shipping = $12.80 + $1.00 = $13.80

That is good information to know!

Bonus: “How Much Can I Discount?”

Break-even price (profit = $0 on the item):
(Materials + $0.20) ÷ (1 − (6.5% + Processing% + Ads% + Admin%))

Using the example:
Break-even = ($8 + $0.20) ÷ (1 − 0.30) = $11.71

From $30, that means up to ~61% off before $0 profit on the item (shipping handled separately). Use your real Ads% and Admin% for accuracy.

Even Better: Keep It Simple with My Pricing Calculator

Press the easy button for Q4 by grabbing my Product Profit Spreadsheet for just $5 and get instant clarity on profit, margin %, and break-even with no formulas to build.

It works for Etsy and Shopify (handles fees and shipping), includes Google Sheets + Excel versions, and comes with a filled-in example so you can plug in your numbers and go.

If your margin is thin, consider trying...

• $1–$3 price nudge on the bestseller; keep if conversion holds.
• Bundles to lift AOV: 2-packs/3-packs or “buy 2, save $X” (dollar-off is easier to control than %).
• Shipping sanity: add a free-shipping threshold (e.g., orders > $45).
• Pause weak ads: keep only campaigns meeting your target cost per sale.
• Improve conversion: 1–2 new photos (in-hand/scale), tighter first 150 chars, add 2 FAQs.
• COGS: negotiate/buy in bulk; swap one component that doesn’t change perceived quality.
• Focus on Admin: what other expenses do you have that you can reduce or eliminate?

Recommended Resource

When I used to sell physical products, I didn’t mind the hours of assembling and packaging because I listened to Audible the whole time. Routine tasks fly by when your brain’s engaged.

You don’t have to be a “book person” to enjoy audiobooks. My dad (hi, Dad 👋), a lifelong newspaper guy, tried Audible in retirement and loves it.

He started with the grandkids’ favorites, mixed in some history and nonfiction, and now we share recommendations all the time. It’s become one of our favorite things to talk about.

If you’re packing orders, commuting, or walking the dog, keep your brain engaged with Audible.

➡️ Start your Audible trial for just $0.99/month!

Small Business Updates

USPS Peak-Season Surcharges: What’s Changing and How to Adapt

Check out this rundown of the Oct 5–Jan 18 temporary shipping increases (Priority Mail, Ground Advantage, etc.), which includes approximate cost impacts. It's helpful for updating your average label cost and free-shipping threshold before promos.

Product Bundling: A Strategic Guide to Increase AOV (+ Examples)

If you're looking for ways to increase revenue this holiday season, check out this article on bundling products. It covers bundling strategies for different types of businesses, pricing tips, and tactical examples you can copy. This is ideal for Etsy and Shopify sellers who want quick wins before the holidays.

On a Personal Note

Our high school football team is in the playoffs, which means extra excitement for my daughter, who is in the marching band. I also can’t believe we are so close to Thanksgiving! What are your plans?

Talk soon,

Sarah

P.S. Grab my Product Profit Spreadsheet for just $5 and get instant clarity on profit, margin %, and break-even with no formulas to build.