Your production or service cost.
What your customer pays.
Delivery, packaging, ads, payment fees, commissions...
Revenue is not profit
Hidden costs silently eat into your earnings. Here is what most sellers miss.
Delivery Fees
Free shipping sounds great for customers, but someone is paying for it. Often, that is you.
Platform Commissions
Selling on marketplaces means giving up 5% to 20% of every sale in commissions.
Payment Processing
Every UPI, card, or net banking transaction costs 2% to 3% in gateway fees.
Packaging Costs
Boxes, bubble wrap, labels, tape. Small per item, but they add up across orders.
Ad Spend
Running ads without tracking profit per sale can turn a winning product into a loss.
Returns & Refunds
Every return costs you the product, shipping both ways, and the commission you already paid.
Pricing essentials for small businesses
How to Calculate Real Profit
Your effective cost is the true cost of each sale: production cost plus every hidden expense. Subtract it from your selling price to get net profit. Divide net profit by selling price and multiply by 100 for your margin percentage. A business earning ₹50 on a ₹500 sale (10%) is far riskier than one earning ₹150 (30%).
What Is a Healthy Margin?
30%+ is strong with room to grow. 20-30% is moderate but leaves little room for error. Below 20% is risky, where even small cost increases can push you into losses. Always aim for at least 30% to build a financial cushion.
Maximize Your Profit Potential
Achieving healthy profitability is about clarity. By understanding your true costs—including logistics, platform fees, and marketing—you can price confidently. Smart adjustments, like optimizing ad spend or slightly increasing prices, often turn break-even products into profit engines. Use our Learn guide to master your pricing strategy.
Common questions
Subtract your total cost (production cost plus all extra costs like delivery, packaging, and fees) from your selling price to get your net profit. Then divide the net profit by your selling price and multiply by 100. For example, if you sell at ₹200 and your total cost is ₹140, your profit is ₹60 and your margin is 30%.
Include your raw material or purchase cost, labour, packaging, delivery or shipping, advertising spend, marketplace commissions, payment gateway fees, and any other per-sale expenses. Leaving out even one of these can give you a false picture of your profitability.
A 20% margin is moderate but leaves little room for unexpected costs or market changes. While it can sustain a business in stable conditions, most financial experts recommend aiming for 30% or higher to build a comfortable buffer for growth and resilience.
This usually happens when hidden costs eat into your revenue. Delivery charges, platform commissions, payment fees, packaging, and frequent discounts can all reduce your actual profit to near zero or even negative. Use this calculator to identify your real effective cost and see where your money is going.
Start by knowing your true effective cost, including every hidden expense. Then set your price to achieve at least a 30% margin. Regularly review your costs as supplier prices and fees change. Reduce unnecessary discounts, negotiate better rates with logistics and payment providers, and consider bundling products to increase average order value.
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