Difference between ROI profit % and Margin %?
Hi everyone, I’m new to this and I would like to know what’s the difference between ROI profit % and Margin %, and what’s a good ROI profit % and Margin % when I search for new items…
THANK YOU!!!
5 replies
Seller_cIIdgKwVd6QF7
Return on investment (ROI)
Measures the gain or loss generated on an investment relative to the amount of money invested. ROI is usually expressed as a percentage and is typically used for personal financial decisions, to compare a company’s profitability or to compare the efficiency of different investments.
Profit Margin
Is the amount by which revenue from sales exceeds costs in a business.
Funky
Seller_BwNv17Ff1XNkA
A VERY simple example.
Item cost $50 (investment)
Item Price $100
$100 - revenue
($50) - product cost
($15) - Amz commission
($10) - Shipping
= = = = =
$25 - Gross Profit
($15) - Operating Expenses (Rent, Utilities, Labor etc.)
= = = = =
$10 - Net Profit
Net Profit Margin = Net Profit/Revenue = 10/100 or 10%
ROI = Profit / Investment = 10/50 or 20%
Hope that helps.
Edited to correct error.
Seller_NfZ5TKZWYJFW0
Return on Investment is a longer term measurement including more costs than simple profit margin calculations.
For example return on investment would include the cost of the lawyer you had to hire to fight an invalid Amazon suspension threat. As well as the your other overhead investments that you were forced to make to support the Amazon business. Return on investment is never calculated shipment by shipment. It is more normally calculated for a quarter, or an annual basis.
Profit margin is much simpler and only includes what you paid for the goods compared to what you sold it for.
