what is the average profit margin for dropshipping
Published on: February 1 2023 by pipiads
Table of Contents About what is the average profit margin for dropshipping
- How Much Did I Profit From $22,751.93? Shopify Dropshipping
- How Much PROFIT I Make From Dropshipping (REVEALED)
- 6 Ways to Increase Your Dropshipping Profit Margins
- How I Find Products With 50% Profit Margins (Shopify Dropshipping)
- This Is How Much Money You Should Make Dropshipping
- How To Price Your Products For Profit 💰[Dropshipping]
How Much Did I Profit From $22,751.93? Shopify Dropshipping
okay. so twenty-two thousand seven hundred and fifty one dollars in sales the first two weeks, Shopify dropshipping. what is the profit? that is a question, again, I get asked very often and I'm here to answer. I'm here to show you guys exactly what's the revenue breakdowns are, day by day, week by week, and show you guys exactly how much this store has profited myself in the past two weeks. so the first week was June 23rd to June 29th. I began testing on June 23rd. the first day was very unprofitable. I think I spent one wasn't very unprofitable, I barely spent any money and didn't accept, say, expect sales, because the sale price for this product is around three hundred dollars with an aov of 450 and I only spent two are $25 this day. that was very unrealistik for me to think I was gonna make sales at that. I launched the campaign halfway through the day, so that's why I didn't spend much. so day two, I spent $49 and got back 540 in sales. that's when I was like, okay, this product may work because I've generated sales and my ad spend was really not that high. and then, day three, I spent a little more money: fifty five dollars, no sales. so I was like, okay, this product may work, it may not. I was still very hesitant. now, day four was the day I was like, okay, this product has a lot of potential. I think I can scale this. I certain $57 and generated nine hundred. now I have the ROE oz pulled up. it says it was a fifteen point seven nine, so around a fifteen point eight row, as that is really good for that day. and I was like, okay, maybe these ads are just getting lucky sales, because if you've ran Facebook ads, you know that sometimes they generate you very cheap purchases sometimes and then it just dies off. and that's what I thought the case was with this, because I was like there's no way I'm getting average orders. it cost at like twenty dollars or something like fifteen to twenty. that was I wasn't really expecting them and I didn't think it was gonna happen long term. and it wasn't until I kept running these ads that I realized that. so that's you know. day five: sixty eight dollars spent, three hundred in sales. that's still a great role. as day six was a hundred dollars spent and six hundred and sales. that's still very good. I'm used to typically like three to four row as, so seeing these results are pretty crazy. I did a few different things than I normally do and I'll tok about those at the end of this video to explain exactly how this happened. and then day seven was basically when I was like, holy, I need to start scaling this up. so it was 119 spent and 2190 dollars in sales is a crazy robot. that is unreal. and I was really shocked when I saw those results. and that's when I was like: okay, this is probably going to be a product that can scale to around $100,000 per day. now, yeah, well, I'll get to that after, but this is the exact revenue and profit and loss and all that stuff. so revenue again on the 29th was 2190. revenue overall for the first week was four thousand five hundred twenty nine. product cost- this is not including shipping- is seven eighty five and then marketing was four ninety. the net profit does include revenue and product costs and shipping costs and marketing cost. so this includes everything. so first week's profit was around twenty seven hundred dollars. I really can't complain with that. and this is not the exact profit. I have the exact profit later down in this slide. I had to calculate the processor costs and everything like that and then I spend money on content. so this wasn't the exact profits, but it was basically it was very close to it. so just keep that in mind, because some people are probably gonna mention like, oh, you didn't include the processor fees or something like that. I have it all included, so just wait a little bit, okay. so this is the second week, which just ended yesterday. I'm filming this on the seventh of July, so this just ended yesterday and I started to scale the budget. I don't know if you guys notiked, but $50 was the daily spend and then basically what I did was just created a new CBO at $50 a day. the first one had 10 ad sets- all have one different interest in the ad sets- and then all I did was duplicate or not even duplicate. I just created a new one and added the top five performing interests and put those into a CBO. basically that's all I did to scale. it's nothing really too complex yet. but day eight: we've hit one hundred and thirty three dollars and ad spend and generated nine hundred dollars. that was amazing results. day nine: this is when things started getting crazy. day nine: one hundred and forty-one dollars spent. two thousand two hundred twenty. so let's go back here. this was the second day and hit two thousand dollars with under two hundred spend. that's when I was like, okay, this product is going insane, I should probably increase budget a little more and if it maintains this revenue, this is a great sign. so day ten to thirty was spent and over ten realize, of two thousand four hundred dollars in sales. that was really nice to see. day eleven: 250 was spent and two thousand five hundred twenty dollars in sales. and this is when I it's an ad spend limits. I did not know this. ad accounts had a limit and it was 250, which was upsetting, so I can't scale it yet. I'm waiting for my ad spend limit to increase, but nonetheless. so by day 12 it had been four days that I've consistently been doing $2,000 plus in revenue with like 250 spend at max per day, and that was when I was pretty much just like, okay, this is a product I need to really focus on and just put most of my attention into. so that's why I've began to just I'm getting a lot of more custom creatives, custom content for my website, just everything is getting custom. I'm getting logo on product and everything like that and custom packaging, because I understand that this product is going to be something that is very profitable for me right now. and then day thirteen, ads started to optimize to 50 spent three thousand seven hundred and four dollars in sales. and then day 14 was the first day we crossed four thousand dollars in revenue, which, keep in mind, I didn't think I was gonna get this fast revenue right away, like I thought this was gonna take me at least a month to get to these numbers because I didn't have data for the product and, if you guys can do the math, it takes a lot more money to spend to get a hundred or a few hundred purchases for a product to then create llas. so these are not from look like audiences. this is all this cold interest testing. but yeah, day 14 was two hundred and fifty dollars spent and four thousand sixty four dollars in revenue. now, that was an amazing week, and the week just ended yesterday. now today, which is the seventh, which is the day after, it's day 15 for this store, sales were at like thirty two hundred, so sales went down a little bit, but nonetheless I cannot complain. that's over a ten row as- and again only spent 250 today. so overall, this has been a great first two weeks of this store. now here is the overall revenue of week two: eighteen thousand two hundred and twenty two dollars. also, if you guys are curious what this app is, it's just called lifetime Li. it's a very simple app that integrates your product costs and your Facebook ads- every- basically all your expenses- and puts them into a nice little chart like this. so revenue: again: eighteen thousand two hundred twenty two for the second week. product costs, not counting shipping, two thousand seven hundred forty seven. and then marketing cost was only fifteen hundred dollars, to be exactly one thousand five hundred and four. so their overall robots for this week was really good, and then the net profit was eleven thousand seven hundred and twenty one dollars. now this again is a little over the actual profit and I'll get into that. I'll show you guys the exact profit in a few slides, so don't worry it's, I think it's like a little under, a little above 11,000, because again, I didn't calculate process their fees properly. so that's why. but yeah, just wait for that. so here are.
How Much PROFIT I Make From Dropshipping (REVEALED)
today I'm gonna answer a question that I get asked about all the time, and it's something that I'm very curious about with other people who do this line of work as well inside of the e-commerce space, and that is: how much money can you actually make by doing any form of drop shipping or selling products through e-commerce? and yes, I know this is only two dollars, but that's all I have in cash. I don't really use cash. [Music]. hey, what's going on everyone? Hayden, you're coming back at you with a brand new video, and in this one, as you can see, we've got the white board peeking behind me just a little bit. I've got a couple of key points I want to share on there for you, so that I can break down and give you a good estimate on what you should be aiming for when it comes to your profit margin inside of your e-commerce business. now, for everyone who already has an existing ecommerce business- or maybe it's something you're looking to get started- there are a whole lot of different routes you can take now. the base model, I guess you could say, for doing any sort of e-commerce is drop shipping. now, the easiest way to do this, the fastest and usually the cheapest, is known as drop shipping on Shopify. this is where you don't have to order your product in advance. you don't have to set it all the Amazon. you don't have to many startup costs. it's more so just identifying what product you want to sell, which is completely free to do. building out a website, which we're gonna toss to tok about all the hosting fees and everything's- it's really only about thirty dollars a month, and then from there, the only cost is acquiring a customer. after someone pays you, that's when you go buy the product and send it to them. so it's a super, super easy setup and it's something where a beginner, someone with zero experience, can definitely get started super easily. and if you guys haven't, or if you're looking for some assistance in doing so, make sure to reference the top two links in the description of this video. happy Black Friday, by the way, that's when this is being posted. we have a major sale going on on the two things I offer. it's the only two things that offer on the end of helping people with e-commerce, because people ask so so frequently. can I get help with my store? so we offer building custom designed websites for you. we're gonna do that. we're gonna handle everything on the product, research, end of it, web development. if you don't know how to do that, no problem, we will handle it very quickly for you, or you can go through our 30-day e-commerce Academy, where it takes you, and you'll have lifetime access to it, week by week, for four weeks, through everything you need to know, live examples and showing you exactly what I do on a daily basis to make well in this situation: two dollars. now, before we get too deep in this video, I wanted to give a huge shout out to one of my students, Samir, who's more of a friend now than anything. he has no idea and hopefully that's cool, but he's been a really cool guy that I've known for almost a year now, and the reason I wanted to shout him out is it was about this time last year when I first met him. we were toking over diem on Instagram. he actually flew to LA, I started helping him with his ads and he basically brought something from- yeah, I think it was like $2,000 a day- to now doing well over a million dollars a month with- and this is why I'm addressing it in this video- forty to fifty percent margins. pretty consistently, he has one of the highest profit margins I've seen on a very consistent basis. he works his ass off to get there and he's very, very consistent with everything he does, his actions, and it's huge. the profit margin side of things is so important exam of the day. you want to have that skill right. you want to know how to do marketing so you can make money. there's other people online who might- just you know, sell information and push revenue- and I see it happen all the time- but how much money actually goes into your bank after all expenses? so that's what we're gonna tok about. I do just want to give a shout out- maybe I'll start doing this frequently- to students of ours that we work with, where they start making a bunch of money, because Samir is on his way to seven figures a month in profit very, very soon. I believe in you, brother, now. with that being said, drop a like for Samir down below and let's jump right into the white board over here. this is gonna be some super, super interesting points, because there's certain costs that people don't think about and there's certain ways that people think about it that I don't really like, I don't really agree with and, honestly, if you can nail these down properly, it's gonna be so much easier for you to generate profit instead of just revenue. okay, so let's break down the very base expenses that anyone is gonna have if you want to do e-commerce now. the first one on top of here. hope you guys can see it. apologies for my terrible handwriting. I'll actually just hold it out. let me get over here on this side. this right here is a very basic breakdown for you: your hosting fees. again. these are gonna include some of the most simple things that everybody has to pay for. you can't really get around. this is your website, your domain and the apps you want to use. this could mean email marketing. you know anything you want to put on your website to make it extra, make it look better, branded a little bit more- which is something we toked about so heavily in our training because it does increase your sales- that is your hosting fees, and these are usually a monthly or yearly basis. so, for example, a domain might cost you about $12 a year, or something like your website might be $30 a month, for some people $200 a month. it just depends. so the next cost- and this is the most day-to-day cost- is your marketing. now I want to make this very clear inside of the marketing section that this is the piece that you control the most. okay, this is where most of your money is gonna be going. this is usually your biggest expense, aside from product costs. usually the marketing will top your product cost. but this is where you have to be really involved in this and this is where the skill comes into it, because if you don't know how to directly spend money through an advertising platform, run any sort of shout out with an Instagram influencer or a YouTube influencer, or just drive traffic to your website that you're hosting, you're not going to be able to make sales. and if you can't do this profitably, then all of this formula will not work. nothing will work if you don't know the marketing piece. okay, that's why it is pretty difficult. okay, so this would include any ad spent and the way that that is structured for me. I actually made a video breaking down my overall expenses, both personal and business. I think this was about three or four weeks ago and I explained how I spend about a half a million dollars a month between my business and my personal life. well, only about six thousand dollars of that is personal. the rest of that is pretty much all ads been an employee payroll, but most of that really falls into the marketing category. so the reason that's so high is because you know, let's say, you're getting a two row ads, which stands for return on adspend. it's a very common term, mostly used with Facebook ads, but for every dollar you spend a one row, as would mean one dollar back. so if you're getting at least a two row, as for every dollar I spend I'm getting two dollars back. so $100,000 out two hundred thousand in. as long as you can really have something where you maintain above a two, you're almost always going to be pretty profitable and have some decent margins. now, obviously, a lot of your ads are gonna be much higher than that. maybe some are lower and you eventually turn him off. it just depends again on your skill at the marketing and what your strategy is. but understand that this is your biggest day-to-day running expense. I don't know why people jump into e-commerce and think that they don't have to spen.
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6 Ways to Increase Your Dropshipping Profit Margins
in this video we're going to cover several ways that you can increase your profit margins when Drop Shipping. now, this video was primarily created with Facebook Drop Shipping in mind. however, you'll notike that a lot of the tips in this video also apply to drop shipping on other websites as well. so the first tip that you might want to test: don't just follow on, jump in and start listing every single product like this- but you certainly might want to test. it is something that used to work on eBay a while back, and that's dollar price plus shipping and then raise the shipping cost. the reason that this works to increase your profit margins is twofold. first, you're not paying the fee on on Facebook because your price is so low, so you're only paying the minimal fee on your product, and then you're charging the shipping at a higher rate, so your profit margin and what you get paid out is going to be a lot higher. so, for example, if your product is 25 with five dollars shipping, or thirty dollars with free shipping, and you mark it down to a dollar with 29 shipping or a dollar with 26 shipping, you're gonna make more money just by simply doing that because of the fees. that's a no-brainer. the second reason that this works is is because on Facebook Marketplace you're kind of competing against other products that are very, very similar and then a lot of, in a lot of ways, if it's saturated, you start competing on price with a lot of other Sellers and what's suggested to them, so you can increase your clicks and increase what Facebook starts to think algorithm wise is, you know, popular with people because they're getting a lot of clicks and a lot of views by simply lowering your price to a dollar, and then that's going to result in a lot more interest on your listing, which, ideally, if you're getting more interest, more clicks on your listing, a few of those will translate into more sales because there's just simply more numbers of people checking out your listing. the second tip is to use cash back credit cards. now, if you're Drop Shipping using retail sites that are common, like Amazon, eBay, Walmart or Home Depot, and there's a number of other ones out there with store cards, and you are not using that store card that gives you back five percent, you're missing out on a ridiculous amount of profit margin. for example, if you only spent 10 like 10- let's make it easy- let's say ten thousand dollars a month on Amazon, for example. well, that's 500 you're missing out on simply by not using the Amazon Store card that gives you five percent cash back. the same would apply to Walmart, the same would apply to eBay, the same would apply to Home Depot or any of the other ones, and obviously, as you scale and you start spending more and more money, that's only going to come back more and more into your profit margins by using cash back credit cards. now, if you're not on those websites, at the very least you should look into other cash back credit cards. I've seen good ones that give up to two percent, but even a one percent one will make a slight difference. the next tip is very related to that, and that's to use cash back portals. so, just like cashback credit cards, cashback portals, our little Chrome extensions that you link up in the right hand corner and you click on them and you activate the cashback on those specific websites that it integrates with to give you extra cash back. now that cashback differs from website's website, but typically it's anywhere from like one percent all the way up to like 10, or I've even seen 15 sometimes on certain websites. so you doing the math on that, that's going to make a massive difference. now, I personally love uh, raccoon. that's my favorite. I've also recommended honey and the Capital One one in the past. I like raccoon and I think it's the best. in my opinion, however, any one of them will increase your profit margins just by simply checking to see if you can get extra cash back using that on the specific sites that you're buying on. so always use a cash back credit card, always use a cashback portal. they're no-brainers. the next one is one that you should certainly be careful with, and that's to use discounted gift cards. now, this is not something- full disclosure- that I really play around with too much, but it is something that you can explore if you do it correctly with reputable sites. so what happens is if people get, for example, credit cards that they they made for a birthday or for Christmas or something like that, and then they want to, you know, redeem that money, but they don't necessarily want something in that store. what they can do is sell it back to a website that buys those gift cards, and you can be the beneficiary of that, because then you can buy that gift card heavily discounted on the website and make more money, because your money is going to go farther, because you are going to actually use that gift card on that website. the next one is simple, but for whatever reason a lot of people don't do it, and that's to just list higher priced products. now, yes, the profit margin on a 200 sale, if you're marketing about 40 or 30 or 25 percent Center, whatever it is- is going to be the same profit margin as if you market like a 10 product up the same amount, but the profit number is going to be different, even if the margin is the same, right? so if you make a 200 sale, 40 of that is a lot more than 40 of a 10 sale. it's basic math. and finally, the last tip is to get tax exams. so if you're using a wholesale supplier, you should automatikally be tax exempt because, chances are, if it's a reputable wholesale supplier, you would have had to give them your retail certificate or your, your resale permit to get on the website in the first place. so you should be tax exempt and not be charged for taxes. if you're using a retail site like Home Depot or Amazon or Ebay or Walmart, again there's another way that you can obviously file for tax exemption because you are not the end buyer and end consumer of that product. so you don't have to pay the sales tax on the product when you actually buy it on the website.
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How I Find Products With 50% Profit Margins (Shopify Dropshipping)
in this video i'm going to teach you how i continuously find products. that has a 50 profit margin, if not even more, on a regular basis utilizing tiktok to find my products. and the best part about this whole strategy is that it requires no money and it's the perfect startup strategy for a beginner out there. but if you're advancing drop shipping, this is definitely still going to be your go-to strategy, because this is the absolute most explosive and viral way to do drop shipping on shopify in 2022, and this is also going to be the strategy where you will see the highest revenue and the most profit relatively fast. so if you're looking for- let's call it like the cheat code- the easy way to drop ship- there's obviously never an easy way to operate a business, but if you're looking for a somewhat easy way- that i would do if i started out today- this is definitely the strategy. by utilizing tiktok and the algorithm there of the most viral social media app out there, you should be able to find winning products on a regular basis pretty fast, and the best part about all this is that strategy is actually pretty fun. we're going to tok about tiktok organic, but we're also going to tok about multiple ways to do tik-tok ads. so what's going on? everyone? i'm henrik, and in this video, we're toking about tik-tok, drop shipping and how you can utilize the tik-tok algorithm to crush it in 2022, and this strategy is definitely the best. so if you're starting out today, i would get onto this. i've seen my friends go from zero to making over 20 000 overnight using this strategy, but i'm not gonna waste your time, though, so let's get into it. how i find products that has a 50 profit margin, if not even higher. i mean, i've even seen it go all the way up to 90, but i'm not gonna waste your time like and subscribe on this video, but let's just get straight into it. and actually, you can follow me on instagram here as well, because i post my drop shipping results there on a regular basis, but let's get inside of my computer, all right. so the first thing we're going to tok about is how we actually find products with this type of margin, and there's two ways to do this. the first one is actually by going to tik-tok and finding different types of stores, but because that's the most interesting strategy and probably your go-to one, i'm gonna go ahead and cover the boring strategy to begin with. but do not click off this video because it's gonna change your life if you apply this. there's no doubt. as i said, i've seen my friends go from 0 to 20k a day just overnight, with the highest margins you've ever seen. so let's go with the boarding strategy we're going. basically, let's just say to more to love. you can do this anywhere. i'm not saying necessarily has to be on aliexpress, but what i'm trying to say is you just want to do product research for a product that could have a high potential margin. so i just pull up a ring. it's like a really good example. what you need to realize when you're doing product research for tiktok is that there's no cost per purchase. so that means that if i buy this ring, which costs a little bit over a dollar with shipping, and i sell it for, let's say, 12, i'm gonna profit 11 for every single sale because there's no cost per purchase. and this is the key to how we find products with just the highest margin. that's probably like 80 margin or something like that. but i'm going to go ahead and find another product because i want to show you, like you know, the perfect example. take this led shower head for an example. obviously it's saturated, but this is just an example. as you can see, it sells for 6.62 shipping. so it just, let's say it sells for seven dollars. if we take this seven dollar product and we sell it for 29, that leaves a 22 profit margin for every sale, unless i'm bad with the math, but approximately 22 dollar per sale and it's gonna cost me seven dollars to ship it out. so we're profiting 22 per cell. that's a product with around assuming like 60, 70, maybe even 80 net profit margins. you'll calculate that yourself. but the point there is to find products that are like kind of cheap, because on takedown you don't want to sell something that's ridiculously expensive. so, basically, just scrolling down there to find cheap products that we could put on tiktok, just to have a high margin. and in a second i'm going to reveal how we actually get this margin, because you might be wondering, like, what about the ads? what about the cost? we'll get into all of this. check this one out as well. ignore the reviews. obviously it's just an example, but as you see, with shipping, this product is going to cost you four dollars and then we sell it for, let's say, 25 and that's going to be a 21 profit margin, which i would assume is like 75 net margin or higher. um, we're doing everything to keep this video interesting. so by doing this exact product research strategy, we're finding cheap products that has a high potential margin. but i know you're probably wondering how do we actually get this margin and i'm gonna reveal that right now. so i'm gonna sit down, let's get back in my pc, alright, so let me show you why we have this high of a profit margin. so if we check out this store right here, which is pretty much a store on tiktok- you might have heard this strategy in the past because it's toked about a lot, but let's check out this store on tiktok. this video has 25 000 views. he's creating his own content, which i think is obviously super cool. but we can do is we can go ahead and open his store. so i'm gonna do that right now because i'm curious to see how much is selling the projector and, as you can see, it's selling for 49. but let's just quickly see their website because i mean the probably the statute, but yeah, you could probably beat him. it's not really a good description, but anyways, he's selling it for 49. there's no cost per purchase because he's not paying for ads, he's just posting it on tiktok. so what this guy's doing is he's ordering the product to his own house. then he's making his own content, probably like with his iphone or something, shooting a video of the product, showing it being used and everything, then putting the link to his store on his tiktok profile and just post tons of videos of the product and then in the end of the video he lets them know that he's gonna put a link in his bio so that if anyone is interested in buying it they can head over to his website. so this example is bad, but take it as an example. what you can see is the product cost 34 plus 4, so it costs like 38, 39- let's just say 39 for the whole product. but if this guy is selling it for, let's say, 49, he's profiting 10 every single sale and he's never gonna break even or lose money because there's no cost per purchase. he's literally just posting it. so if we didn't go back to the ring, which costs like a dollar one and a half, let's just say it costs a dollar- if we go back to the ring, we can price on our website for 15 or 12 dollars- let's just say 15, and then we have a one dollar cost per purchase and, as you know, we're not paying for ads. we're literally just posting a product on tiktok. so if i sell one copy of this product for 15, i'm profiting 14 every single time, and i'd say that might be like a 92 percent profit or something. you calculate that, but this is the point. so obviously this guy didn't have the biggest margin, but you can do this with all products. let's go back to this one as well, which you see selling for seven. we put it on a website for 29, and that means every sale we make is a 22 profit sale. so by using this strategy, you can pretty much drop ship without any cost and no cost per purchase. but obviously you will have to order the product to your house, though, but that should not really cost you that much. so let's say you order a product for seven dollars your house, because that's the amazon buying price. you're literally testing products for five to seven dollars. the only thing you need to start this business is the shopify store and ordering the product to your own house. so wh.
This Is How Much Money You Should Make Dropshipping
what's up everybody, anton crowley here from dropship lifestylecom, and on monday of this week i had posted a video sharing what it takes in ad costs to generate 50 000 a month in sales. now that video is doing very well on the channel, has a lot of likes, a lot of great comments, so first of all, thank you for that. but it also had a few people that said it's a lot easier to do 50 000 in sales than 50 000 in take-home profit, which obviously is true. so what we're going to tok about in this video is drop shipping profit margins and, more importantly, how to increase them. so, with the goal of making this as simple as possible, i actually made a profit calculator template that you can use on your own computer. all you need to do is click the link below this video to open it in google drive, then click file and then it will say: make a copy. and if you click that, it'll copy this into your own google drive account and you can follow along and do the same thing yourself. so for everybody watching this on youtube or as a spotify video podcast, which are now available, i think thanks to joe rogan, you'll be able to see me going through this if you're just listening to the audio, though, on apple podcasts or anywhere else again, if you want to follow along, click the link in the description. so what i'm gonna do is take you through the profit calculator and show you different examples that you should do yourself before you even make your first sale, because this is a big problem, not just with drop shipping, but with business in general, for new entrepreneurs. i'm guilty of it myself when i first started. you get into business and you just think: i want to do more sales, i want to do more sales, i want to do more sales. and then maybe a week goes by, or a month or a year, and you realize that either you're operating at break even, maybe you're operating at a loss even and going into debt, and the reason this happens is completely avoidable. it's simply because people don't pay attention to this stuff, they don't know their numbers and they let this happen time and time again and it compounds on itself until people are in trouble. so what you want to do is do this again before you even get a sale, to know how much money you can be making and where your numbers need to be for you to make that money. so the way this works, it's very simple. starting at the top is sale price. now this would be the price that you sold a product for on your store, what your customer pays you. so let's just say we were selling a stand-up desk, because i'm at one right now- and the price for it was- we'll call it- twelve hundred dollars. okay, so your customer goes to your store, the price for this product is twelve hundred dollars. boom, customer pays that with their credit card, their debit card, whatever. now you'll see the second row in this calculator are merchant fees. now these are calculated automatikally here because for most new store owners these are fixed. it's a variable cost in the sense that it'll change because it's a percentage of the sale. but the percentage rate is pretty much fixed for new store owners that go with a standard shopify plan and this expense is 2.9 of the transaction plus 30 cents. so flat fee of 30 cents, then 2.9 of the transaction for a 1200 sale. if we use shopify payments on a standard plan- we didn't have history to negotiate this price. then we would pay 35 and 10 cents in merchant fees. okay, so first thing comes off top line right away. now the next thing, and this should be. by far the biggest expense for every order that comes in is product cost. this is: what are you paying your supplier for this specific product? what is your cost of goods sold? now probably know this if you're a member of dropship lifestyle or if you've watched any of my videos on pricing. but you want your product cost to be no more than half of what you sell it for. so in this scenario we sell the product for 1200. that would mean the most we want our product cost to be is 600. now i'm going to take you through these numbers, kind of just stok right. then we're going to tok about how, even though that might seem like a fixed expense, because that's what your supplier gives you on the price list when you get approved to sell for them. all of these things can be negotiated and that's why knowing your numbers is so important. but again, we'll get to that. so next cost is shipping. so we offer free shipping on all of our stores because pretty much the entire industry does and has for the past decade, and that's free. standard shipping. right, there's upgraded shipping options that can cost more, but for standard free shipping that means the customer pays zero and we pay for that. so how do you know what shipping costs are? because, again, this is a variable expense. let's say, the warehouse that stores these stand-up desks is in new york. well, if it ships from new york to new jersey, it's going to be a lot less money than if it goes from new york to california. now, from new york to california we might get one quote for that shipment and it might be 300. well, with freight shipments, shipments for large and heavy objects, you should actually get quotes from different shipping carriers and from different brokers, because what i found- and learn this the hard way again- is that freight shipping costs vary greatly, and this is one of the easiest places to save money and to protect and increase your profit margin. so one quick way you could do that is go to a website called freightcentercom and when you go there you'll see it says calculate freight rates. if you click that, you can enter the pickup information, which would be your supplier's warehouse, right wherever that may be. then you can enter the shipment information: how big is the package? your supplier provides you with this information and then for delivery information, you would enter different addresses: maybe one again in california, one in new york, one in florida, one in texas, and you can get an average cost. so in the beginning, when you're trying to figure out your potential margin, you can at least have the average to stik in to this calculator. so let's just say we did the math and the average we found was 150. okay, boom, we'll put that there. now our next cost, and this one. again, people overlook it. i don't know why, and this is one where people can really run away with their spending as well. but this is your ad costs, your ad cost for a order. another way to refer to this is cac. cac stands for customer acquisition cost. so for this hypothetikal 1200 stand-up desk, what do we pay to get that sale? now, you might know this as well. if you're a member of the drop ship blueprint, you know all of this plus a whole lot more. so speaking to the choir here, but for everybody that's watching that for some reason isn't a member of dropship lifestyle yet, i still have no idea why you wouldn't be. but if you're not, just know that the most we're willing to spend in ads is up to 10 of the sale price, because we want a 10x return on ad spend at a minimum, what does that mean? it means to sell a 1200 item. i would be willing to spend up to 120 to get that sale- 10 of the sale price. now you'll see that i entered all these numbers in it. added up my total expenses in this hypothetikal, my total expenses for this 1200 sale were 905 dollars and 10 cents. that left me with a dollar profit amount of 295 dollars and a net profit expressed as a percentage of 24.5. so basically, 25 net margin and 295 again that we get to keep for selling this 1200 product. now the reason i'm giving you this calculator again- make a copy of it in your own google drive account with the link below this video- is so you can plug in first of all your actual numbers and then also your potential numbers. because what you might find is sometimes your potential profit margins, or actual profit margins, are way higher than this and sometimes you're gonna find out they're way lower. so if they're way higher, then good for you. you know all as well, keep running business as per usual, keep making more money, but if you're
How To Price Your Products For Profit 💰[Dropshipping]
what's up everybody? anton crowley here from dropshiplifestylecom, and in this video, i want to show you how to price your products for profitability. this is something that's extremely important and it's a way that you can make sure, when people go to your website, when they go to your online store and they actually buy something, that you will make money- not that they'll buy it and you'll send the order to your supplier and you'll realize that there's no money left over or, even worse, you lost money, and unfortunately, that's what a lot of people that are just getting into e-commerce and trying to leverage drop shipping. that's what they do, because they sell for brands that don't have any pricing controls, or they just look at their competitors and see, oh, this company is selling this product for this price, i'm gonna do the same- and then they find themselves in the situation where they might get sales and there's no money to be made. so what i'm gonna give you in this video is a very simple equation that i use and that i recommend you use before you even list products for sale, before anybody goes to your website and buys it, and before you find yourself in a situation where you got an order but you did not make any money on it. now i'll also say, if you know anybody that's running an e-commerce store or thinking of doing so, i would highly encourage you and i would appreciate it if you can share a link to this video with them, because, again, this is something i see come up over and over again and something i've seen come up ever since i started dropship lifestyle and toking about how we do this stuff way back in 2013.. so if you know anybody that would benefit from this, click the share button, share it with them and let them hear this as well. now i'm going to switch screens. i put together just a really simple drawing of what this looks like, and the first answer to the question of how should i price my products that i'll typically give is sell them at map, but there is a step after this, so keep that in mind. but for those of you that don't know what map is, when you get approved to become a authorized retailer for different brands, they'll typically send you a price list that has three different prices, so those prices will be msrp, map and wholesale. so we'll tok about what each of these are and what they mean. now, msrp stands for manufacturer suggested retail price, and this is a price that basically nobody is going to sell at. i would say 95 of the time. but let's just say hypothetikally, msrp, for a product you were looking to sell was 1200.. now the next column is map. this stands for minimum advertised price and this is the lowest that you or your competitors would be able to advertise the product for. so let's just say again, we'll use easy numbers here. as a hypothetikal, let's say: map is one thousand dollars. that would mean the lowest that you can list the product for on your store is a thousand dollars. and if i was selling it, the lowest i can list it for was a thousand dollars as well. now the next column in the price list is wholesale. wholesale is what you pay for the product, right? this is your wholesale cost to the supplier. let's use 500 here as a hypothetikal and just so everybody's aware this is important to keep in mind as you're reviewing price lists from your future suppliers. the difference between wholesale and map should be about a hundred percent. so at a minimum we want to see the map price- remember the price we're going to sell for. we want to see that be double what our wholesale cost is. so if our wholesale cost is 500 at a minimum. we would want map minimum advertised price to be a thousand dollars and you might be thinking like that sounds like an amazing margin, i'm gonna make a ton of money. but there's a reason we want it and need it to be so big, and it's because we obviously have other expenses. so let me erase this now and i'll show you the actual equation that i use and that you should use to make sure you're pricing your products profitably. so the first thing that we list in this equation is map, again, the price that we are planning on selling the product for. so for this hypothetikal, let's say, map for the product is a thousand dollars. also, side note, for a quick tip, you can and should do this in either google sheets or excel, whatever you prefer. it's a lot faster, especially if you're doing this for a bunch of products, but for this video i'm just gonna draw it out. so, again, first thing we look at is map. that's a thousand dollars. now the first thing we do is multiply that, and we multiply it by .97. now, the reason we do that is because the first expense that we're going to have is the merchant processing fee. so, whether you're using shopify payments or stripe or pretty much any other payment processor out there to accept credit and debit cards from your customers, you're going to be paying about 2.9 cents plus 30 cents per transaction. so let's round up, make it three percent. what that means is, if we multiply our a thousand dollar sale by the 0.97, that means at this point we're already spending 30 bucks in processing fees and we're left with 970. now the next thing that we do- that you should do too- is subtract the wholesale cost. so i'm just going to put w here for wholesale and let's use the number we just came up with, which was 500, as our wholesale cost. again, you're going to get this number and you're going to see this number from your price sheets that you get from your suppliers. now, after we subtract that, in this scenario we would be left with 470. but again, we're not just making 470 profit, because we have more expenses and on all of our stores, all of our drop shipping stores, we offer free shipping, and i get questions about this. but when i say we offer free shipping, it doesn't mean somehow like the products magically ship for free. it means our customers don't pay for shipping and we cover that cost. the reason we do this is because basically every other online retailer does and has for probably a decade now. so you know, if we were going to be the one company that says, hey, pay us 150 bucks to ship this thing and everybody else says it's free, no one's gonna buy right? so we offer free shipping on all of our ecommerce stores. now, the number that we use here in this equation for shipping is not an exact number. it's an estimate, and the reason is because shipping costs vary. let's just say again, hypothetikally, the product that i was selling was the stand-up desk that i'm at right now, and let's say that this product sold for a thousand dollars at map. now let's also say that the supplier that makes this and that stores it was located in north carolina. that's where their warehouse was. well, if somebody buys this from me and it ships to north carolina, it's not going to cost that much money. but if somebody buys it from me and they're in california, obviously it's going to cost more to ship because of chipping cross country. so what we like to do is find an average shipping price for the product. so what i would do here, and what i would encourage you to do, is. go to any different freight broker. there's tons of freight brokers out there that you can go online and get free quotes with- and go ahead and put the shipping address, the shipping location, as your stand-up desk supplier in north carolina, whatever their address is, and then, for the shipping location or destination, put an address that's local, maybe something else in north carolina, maybe put an address in new york, put an address in florida, put an address in california and try to get an average of what it costs to ship the product throughout the states or throughout whatever country you're doing business in. so let's just say i did that. i ran the numbers and, again for simplicity, i found that the average shipping cost was a hundred and fifty dollars. well, i would subtract that from my 470 and at this point i would be left with a potential profit of three hundred and twenty dollars. now, three hundred twenty dollars, right, for a product i sold for a