This episode is a masterclass in pre-sourcing financial due diligence. It breaks down how to accurately calculate true product profitability by accounting for all hidden costs beyond just the supplier's per-unit price. Ecommerce operators will learn to avoid costly mistakes by "failing on paper" first, ensuring a healthy profit margin before investing in inventory.
Key takeaways
Before sourcing, determine best-case, base-case, and worst-case sales price scenarios. Don't just assume your ideal price point will hold in the market.
Factor in all "landed costs" including packaging, barcoding/labeling, tariffs, and all shipping (from manufacturer to port, and port to fulfillment center/warehouse).
Utilize a "four to five times landed cost" rule of thumb: if your sales price isn't at least 4-5x your all-in landed cost, profitability will likely be squeezed.
Aim for a minimum 30% gross margin per unit to cover operating expenses and owner's pay, otherwise the product isn't viable.
Download and use a detailed profitability calculator to systematically account for every potential cost and avoid overlooking critical expenses.
Episode 012 On today’s episode, David and Ken take a deep dive into the world of understanding your numbers as it relates to sales price, costs, and profit margin. This is a critical step to complete before sourcing a new product and provides confidence in knowing that what you sell will be profitable. FiringTheMan Profitability Calculator is available for download at: www.firingtheman.com/calculator The YouTube video with helpful tips and tricks CLICK--> ...
What does this episode say about finance & fundraising?
Before sourcing, determine best-case, base-case, and worst-case sales price scenarios. Don't just assume your ideal price point will hold in the market.
What does this episode say about supply chain & operations?
Factor in all "landed costs" including packaging, barcoding/labeling, tariffs, and all shipping (from manufacturer to port, and port to fulfillment center/warehouse).
What does this episode say about product & merchandising?
Utilize a "four to five times landed cost" rule of thumb: if your sales price isn't at least 4-5x your all-in landed cost, profitability will likely be squeezed.
What does this episode say about finance & fundraising?
Aim for a minimum 30% gross margin per unit to cover operating expenses and owner's pay, otherwise the product isn't viable.
What does this episode say about finance & fundraising?
Download and use a detailed profitability calculator to systematically account for every potential cost and avoid overlooking critical expenses.
