How to calculate your profit and profit margin on Etsy

If you’ve been selling on Etsy for some time you are well aware that what you see on your Seller Dashboard as “revenue” is certainly not what you take home at the end of the month! There are a slew of fees that are charged including processing fees, transaction fees that take a bite out of your bottom line. Not to mention the actual costs associated with actually making your products - the time you spend, or the material costs, shipping and more!
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Because of all these costs, it can be hard to determine your actual product profitability or overall profits unless you’re doing some calculations to stay on top of these key metrics.

‍What is the difference between profit and profit margin anyway?‍

Profit is the amount remaining after deducting total expenses from your total revenue.

Profit: ( TOTAL REVENUE - TOTAL EXPENSES ) 

Profit margin is the ratio of profit remaining from sales you have made after all expenses have been paid.  You can calculate your profit margin ratio yourself by subtracting total expenses from total revenue, and then dividing this number by total expenses. 

Profit Margin: ( TOTAL REVENUE - TOTAL EXPENSES ) / TOTAL REVENUE

We will go through a detailed example of this later in this article, but first, let’s make sure we’re clear on what the key terms in this calculation mean for you as an Etsy seller.

Key Terms: Revenue & Expenses‍

In Etsy your revenue is pretty easy to find in your Payment Account.
To get there go to Shop Manager > Finances > Payment Account.

Under “Activity Summary” you will see a breakdown that looks like this:

Under “Sales” that will show your total revenue in green. That number indicates your total revenue from products sold in the date range selected. 

To the right of that, you will then also see “Fees” in red. That number indicates your total expense from products sold in the date range selected. It breaks these down by listing fee, transaction fee and processing fee for you clearly. 

Below fees, you will also see “Delivery”. If you have delivery costs associated with your orders, you will also have postage costs noted here, or sales tax on postage labels. (Our example doesn’t have costs for this however).

All of these fees plus the delivery costs in your Account Summary are an inherent expense of selling on the marketplace. You will note that this Payment Account therefore also shows your NET PROFIT clearly, which is simply:

( TOTAL REVENUE ) - ( (TOTAL FEES) + ( TOTAL DELIVERY) )

So while the net profit in Etsy accounts for expenses like 1) their fees and 2) the cost of delivery, it does not actually account for all of your expenses, does it? 

What else do you need to account for in your expenses?‍

1) Cost of Goods

If you’re buying products and reselling them, then you also need to account for the amount you pay for that product.  For example: Say you re-sell vintage clothing on Etsy and you are selling a pair of boots for $100, your profit calculation might look something like this:

Etsy Sales Revenue: $100 USD

Expenses: 
Cost of boots: $20 USD 
Shipping: $12 USD
Listing Fee: $0.20 USD
Processing Fee: $3 USD + $0.25
Transaction Fee: $5 USD

Total Expenses: ($20) + ($12) + (0.20) + ($3.25) + ($5)Total Expense Cost =$40.45 USD

Now using our formula forprofit: ( TOTAL REVENUE - TOTALEXPENSES) 
($100 - $40.45) 
Profit = $59. 55 

Profit Margin: ( TOTAL REVENUE - TOTALEXPENSES) / TOTAL REVENUE
($100 - $40.45) / $100
= 0.5955 x 100
Profit margin = 59%

2) Cost of Materials‍

Another scenario to account for different types of expenses is if you’re a maker and creating something, you need to account for the cost of the raw materials, plus also for your time to create your products. This might look a little bit different than the example above.

In this example: Say you are a candle maker. You must purchase raw materials to make your products, and you also must account for your time to make the candles. Your profit calculation might look like this:

Sales Revenue: $60 USD

Expenses:
*Making 2 candles

Cost of wax: $8 USD
Cost of wicks: $0.22 USD
Cost of containers/vessels: $2.78 USD
Cost of essential oil: $0.02 USD
Cost of thank you card insert: $0.12 USD
Shipping: $6 USD
Listing Fee: $0.20 USD
Processing Fee: $1.8 USD + $0.25
Transaction Fee: $3 USD
YOUR TIME: $10 (15min work)‍

Total Expenses: ($8) + ($0.22) + ($2.78) + ($0.02) + ($0.12) + ($6) +(0.20) +($2.05) + ($3) + ($10)
Total Expense Cost = $32.39 USD

Now using our formula for profit: ( TOTAL REVENUE - TOTAL EXPENSES) ‍
($60 - $32.39) 
Profit = $27.61‍

Profit Margin: ( TOTAL REVENUE - TOTAL EXPENSES ) / TOTAL REVENUE
($60 - $32.39)  / $60
= 0.46 x 100
Profit margin = 46%‍

While Etsy provides some financial reporting capabilities, the fact that sellers cannot also include their cost of goods or materials means that it’s impossible for them to get a real sense of profitability per listing unless they complete an analysis like that noted in the examples above. Besides just knowing that you are making money on your products, focusing on your overall profit margin can also be a really helpful tool in increasing your overall profits. This is particularly true if you change suppliers, or buy raw materials in bulk, potentially lowering your expense cost, and increasing your profit margins and overall profit per order. We hope this article helped clarify a few things and helped you get a better handle on your profitability. Happy selling!