When trying to determine how much profit you stand to make on the sale of a listing, there are two main methods for calculating profit: Profit Margin and Return on Investment (or ROI).


Profit Margin

Profit margin is calculated as:
Profit / Revenue

Expenses include your item's purchase costs and any fees (including FBA fees) assessed by the marketplace the item is sold on.

If you bought an item for $20, sold it for $100, and Amazon took a cut of 15% ($15), you would have a profit of $65 and a profit margin of 65%:

Profit is your Revenue ($100) - Cost ($20) - Fees ($15) 

Profit Margin:
Profit
($65) / Revenue ($100) = 65%


ROI

ROI is calculated as:
Profit / Cost 

Using the same example above of a $20 item sold for $100 with a 15% category fee, you would have profit of $65 and a Return on Investment of 325%

Profit is your Revenue ($100) - Cost ($20) - Fees ($15) 

ROI:
Profit
($65) / Cost ($20) = 325%


Comparing the two

One of the major differences between profit margin and ROI is that profit margin can never exceed 100%, while ROI can. There are pluses and minuses to each way of calculating profit, but one is not inherently better than the other. 

Did this answer your question?