15% Profit Margins - Should I Just Quit?!
I’ve been selling for almost seven months now and after all my expenses including the fabulous VAT rate of 20%, my profit margin is around 14-15% per product line, sometimes as low as 10%. To date, I’ve made around £105,000 in sales.
I’ve estimated in order for me to make £75,000 per year at a profit margin of 15%, I would need to generate £500,000 in sales! I don’t know about you but that just seems heart-wrenching to me! Dealing with all the potential support issues, warranty claims, returns and the dreaded VAT tax returns and bookkeeping for a meagre £75,000! It just seems to me the ROI just isn’t good enough!
Am I just being greedy or is this average for most sellers on here?! I’m really at the end of my tether now and growing tired.
My hope had always been to aim for around 20-30% profit margins but I have ABSOLUTELY no idea how people can achieve that with VAT and all the other expenses. If you google it, apparently everyone is making around 20-30% on e-commerce sales which I think is just a whole load of tosh!
Should I just quit whilst I still have most of my hair on my head?! Which, by the way, I take great pride in! 
15% Profit Margins - Should I Just Quit?!
I’ve been selling for almost seven months now and after all my expenses including the fabulous VAT rate of 20%, my profit margin is around 14-15% per product line, sometimes as low as 10%. To date, I’ve made around £105,000 in sales.
I’ve estimated in order for me to make £75,000 per year at a profit margin of 15%, I would need to generate £500,000 in sales! I don’t know about you but that just seems heart-wrenching to me! Dealing with all the potential support issues, warranty claims, returns and the dreaded VAT tax returns and bookkeeping for a meagre £75,000! It just seems to me the ROI just isn’t good enough!
Am I just being greedy or is this average for most sellers on here?! I’m really at the end of my tether now and growing tired. My hope had always been to aim for around 20-30% profit margins but I have ABSOLUTELY no idea how people can achieve that with VAT and all the other expenses. If you google it, apparently everyone is making around 20-30% on e-commerce sales which I think is just a whole load of tosh!
Should I just quit whilst I still have most of my hair on my head?! Which, by the way, I take great pride in!
118 replies
Seller_8Q8ya7roh8mlR
Morning
I have the same thoughts, my sales are nowhere near yours but for sure Amazon make more than me.
And competing with overseas manufacturers with stock in the UK is not helping.
The same manufacturers that contact me every day to buy stock…
Seller_lljyzgTxr5fgI
30% profit margin is a mythical figure which gets bandied about because that is what the supermarkets and big businesses aim to generate. Everybody has different rates of return for different product lines. We can literally make thousands of percent profit on some items and then 5% on others. Obviously we would like to sell far more of the former than the latter, but it doesn’t work that way. It’s all about what you need to comfortably survive.
15% may be sufficient for you or it may not, depending on how much work you have to put in to achieve that. If you buy a product, ship it straight for FBA and then do nothing else, 15% might be perfectly fine. If you’ve got to spend ages prepping it before you send it, you want a better return because of the time and resources involved.
At the end of the day, I wouldn’t look at percentages but at the overall picture. Do I make enough money to comfortably survive? If I do, then the margins wouldn’t bother me; if I don’t, I’d be looking to do something else.
Seller_ZQyopdiwkUHOZ
Earning £75k pa would put you in the top 8% of earners in the whole country. If you don’t consider that worth the hard work running your own business requires then I would advise you to stop.
Seller_7VbclcPFFRTnc
Only you can decide whether or not its worth it for you with those profit margins
If you’ve come from employment whereby your annual salary was over £100k which amounted to a take home amount of £75k , then yes you’ll need to up your sales and profit margin to make selling on here an amount you are accustomed to.
I wouldn’t say you are being greedy in the slightest - the aim of business is to make money after all
What I would question is where the figure of £75k take-home comes from ?
I would imagine there are sellers on here that range from £200 a year as a top up to a full time time clearing out old books etc all the way to the millionaires
I do believe though that the average annual wage still amounts to approx £26k - £38k a year
Seller_77IcbQKVGdZo0
When I worked for a retailer the margin that they set their buyers to aim for was 20% to 25%. However this was just the pure margin on the profit and didn’t take into account all the operating expenses of a very large business. In reality the profit margin after expenses was a lot lower.
I would say if you were getting 15% profit margin after all your expenses you are doing okay.
I would imagine there are many sellers on here you do not make £75,000 a year profit and can live comfortably on what they earn.
If you want to make higher profit margin maybe look at different products. If you just want to make more profit look at a wider range of products.
Whilst profit margin is important I would say overall profit in pounds is more important.
I would also say don’t feel like you are greedy because you want to earn more. The primary aim of any online business should be to make as much money as they can!
Seller_esvgLzKXw2YAl
I think you may be looking at it the wrong way.
As many have already said, the margins vary considerably on items.
Don’t we all wish we could sell something with 100% margin on, but very few of us do actually manage that.
I’m more than happy to sell 100 items of one line per day, making £10 out of it. That can literally equate to 2-3% margin. depending on the price point etc.
Look at it this way. Compare the profit with the actual work you do.
ie. you make £100 in a day and work 5 hours. At that, your making £20 an hour, which is more than reasonable. Obviously if that same money is taking 15 hours, then it gets a lot worse.
So decide a rate that you want to make, then if a line doesn’t make that rate, drop it. And concentrate on something else instead.
You also have all of the advantages of being self employed. ie no boss and so on.
But to be honest, most will make fairly small margins and the vast majority of third party sellers, are quite small in scheme of things. An awful lot using it as a second/third income stream.
Seller_ae51e0CJoHqCX
You can’t really base what you do just on the figures and what you speak of when it comes to margins is not necessarily typical.
I will do the courtesy of giving a little bit of insight.
Firstly margins will depend on how much you buy the product in and sell it for . You may have a supplier who is enjoying a big margin off what you supply which will decrease your margin.
The VAT can hugely affect your margin but not by 20 percent. Some on here are not vat registered or on a flat rate discounted scheme but again this depends on how tight your margins are. If you are buying goods and paying VAT on top and VAT registered you can afford to have a tighter margin than someone who is on the flat rate scheme. Not being registered for VAT is a distinct advantage but limits your ability to sell and expand.
I used to buy items in at a high price with low margins but once I gathered momentum and supply, I was able to drive down my costs. This meant I was able to retain price but up the margins and maintain increasing turnover. I stick to products that I know I have a distinct advantage. I’m not saying what that advantage is or how i do it, but if I was on 15 percent I probably wouldn’t survive.
Some products that involve having technical knowledge as well as equipment may mean that you can demand a higher price with low costs attracting a higher margin because you are adding value and margin to the product.
You could have traders who are also manufacturers or brand owners selling straight to market. If they are making 15 percent from selling to you, how are you ever going to make a margin from selling this when the suppliers have a 10-15 per cent head start?
Original question is 15 % profit margins should I quit? This is not something that anyone can really answer, If I had 15% of Amazon profit I would be tempted to stay on, if you offer me 15 percent of the Royal Mail profit for the next year, I would quit.
Seller_qZO3ZCjoBXEeL
I don’t know how you’ve calculated your figures but depending on how you are running your business and calculating your profits you may just be at an expansion threshold.
First, please consider this, in an economy where people are losing multi-generational businesses through no mis-management of their own to be running your own, young business, and being profitable is no small achievement. Congratulations!
Second, your future profitability will affected by other factors.
Presumably you have certain overheads factored into your current profitability? Any fixed costs for things like accountancy, insurance, travel, internet, utilities have already been paid for now. Any future sales you make don’t need to cover that additional overhead, which might raise your profitability.
Lastly it is extremely unlikely that you’ll find many small businesses that will operate with much better overall net profitability at the scale you are at. Have a look in your local trade sites for businesses for sale. You’ll certainly find lots of bricks-and-mortar shops for sale turning over less than £100kpa supporting a couple of people.
This isn’t a get rich quick operation. Take your 7 months of selling experiences and look to see where you can streamline. Where do you wish you had more time to focus and can you buy or rent software to do it for you? Would taking on a bookkeeper (as a service) free you up to do more product development and customer service?
You need to evolve as you grow, you cannot (usually) expect to use systems you put in place at the start to be the right way to do things at £500k turnover.
Lastly - and this is contentious - if you intend to get to £75k earnings for yourself - I would strongly advise you to begin planning for how to do so using more than one platform or channel. People do run their entire businesses on Amazon alone, but that thought scares the pants off me!
Seller_KL2DNJGuNpMzr
Unfortunately you have now discovered Amazon.co.uk is a beast that not many retailers are able to tame. Unless you are willing to commit your heath & soul you will always be chasing your tail on any 3rd party platform.
Quite simply unless you are manufacturing or white labelling you will never make the margins of 25/30%. If you are simply buying from a Brand/Distributer you will be lucky to make 10/20% on any items sold on Amazon.co.uk.
This is from my experience on 3rd party platforms & the fact the numbers have rarely add up unless we are achieving high turnover.
Its especially difficult when you are offering free postage & we will be moving away from this model within the next 7 days.
