How to work out your real profit on an eBay sale

Ask most eBay sellers what they made last month and they'll tell you their sales. Ask what they made after fees, postage and stock and you'll often get a pause. That's not carelessness. eBay's fees come in several pieces, some of them appear days after the sale, and postage and packaging never show up on the order at all.

It's worth getting a rough handle on, though, because it's very common to find one or two products that sell well and make almost nothing.

Everything that comes out of a sale

Start with what the buyer paid (the item price plus the postage they paid), then take off:

Final value fee. eBay's main selling fee. It's a percentage of the total the buyer paid, including postage, and the percentage depends on the category. There's usually a small fixed fee per order on top. Check eBay's current fee page for your categories, as the rates change from time to time.

Promoted Listings ad fees. If you use Promoted Listings and the buyer clicked an ad before buying, you pay the ad rate you set as a percentage of the sale. This is easy to forget because it isn't on the order itself.

Other eBay fees. Depending on how you sell, there may be an international fee for buyers abroad, fees for listing upgrades, or a shop subscription. The subscription is a monthly cost rather than per sale, but it still has to come out of your profit somewhere.

VAT on fees. If you're a VAT registered business in the UK, eBay adds VAT to its fees. You may be able to reclaim it, but it affects your cash flow.

What the item cost you. The price you paid for the stock, including any delivery to you and import costs.

Postage. What you paid to send it, which is often different from what the buyer paid. If you buy labels through eBay, that's another deduction from your payout.

Packaging. Boxes, mailing bags, bubble wrap, tape, labels. Only pennies an order, but it adds up, and it's almost always left out.

Refunds and returns. A refunded order still costs you the postage both ways, and eBay doesn't always give back every fee.

A worked example

Say you sell a phone case for £14.99 with £2.99 postage, so the buyer pays £17.98. For the example we'll use a 13% final value fee plus a 30p order fee, and a 5% Promoted Listings rate. These are made up for illustration, so use your own figures.

That's about a 40% margin on what the buyer paid, which looks healthy. Now drop the price to £11.99 to compete and raise the ad rate to 10% to get seen, and the same sale makes £4.08. Every one of those decisions made sense on its own.

Where profit quietly disappears

A few patterns we see again and again:

• Free postage on heavy items. The buyer pays nothing, so the whole cost comes out of your price, and the final value fee is still charged on the total.
• Ad rates creeping up. Raising your Promoted Listings rate is an easy fix for slow sales, and it comes straight off your margin on every sale it applies to.
• Low priced items. The fixed per-order fee and packaging hit a £3 item much harder than a £30 one.
• Returns on cheap items. Two lots of postage can wipe out the profit on several sales.
• Old cost prices. If your supplier has put prices up and you're still using last year's figure in your head, you're making less than you think.

Working it out without spending hours on it

You don't need to do this for every order. What's useful is knowing the profit per product, so you can see which items are worth pushing and which are just keeping you busy.

1. Make a list of your products with what each one costs you.
2. Set one typical postage cost and one packaging cost per order.
3. Download your fees from eBay (Seller Hub, Payments, Reports) for a month.
4. Put it together in a spreadsheet by product.

It's tedious the first time and much quicker after that. Even doing it once a quarter will tell you more about your business than a year of looking at sales totals.