How to Calculate Dropshipping Profit Margin (With a Worked Example)

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Margin sounds simple until fees, returns and ad costs get involved. Here's a clean way to do it.

The three numbers people mix up

• Profit = revenue minus all costs, in dollars.
• Margin = profit divided by revenue, as a percentage.
• Markup = profit divided by cost, as a percentage.

Worked example (illustrative numbers)

• Sale price: $40.00
• Amazon cost incl. tax: $29.00
• eBay fees (assume ~13% plus a small per-order fee): $5.40
• Profit: $40.00 − $29.00 − $5.40 = $5.60
• Margin: 5.60 / 40.00 = 14%
• Markup: 5.60 / 29.00 ≈ 19.3%

Adjust for reality

Not every order goes perfectly. Include a small allowance for returns, refunds and the occasional loss, then compare it to your monthly numbers. If 1 in 20 orders costs you its full margin, your effective profit is lower than any single order suggests.

Track margin per product, not just overall. A few strong items often carry the whole shop. More in Lesson 4 and beyond the spreadsheet.