There are thousands of sellers so, obviously, there are lots of ways to do it. But, if I were to describe the major ways, they would be:
- Sellers without any financial management program – they just flow with it – they don’t really know if they have good performance, what their monthly profit is, or if their business profits are improving.
- Sellers that want to have a financial management program – but they really don’t know how to build it as the numbers are very complicated, and there is a lack of time or know-how.
- Sellers that have a financial management program – the professional ones that are awaiting the first day of each month because they really want to calculate their profit to analyze their performance and understand their profit trends.
Why do we need a financial management plan?
We must change our mindset and understand that we own a business. Sometimes it’s small, sometimes it’s huge, in any case, it’s a business and we must treat it like one.
We don’t spend hours studying, marketing, buying and selling just because we enjoy it – we are doing it to make money – it’s as simple as that.
And, if we do not know exactly how much money we are making every month, what’s the point of all of this? The hours and days you are spending to operate your business, are they for nothing?
We should understand the flow of cash, to know all the details, to know that there is a positive flow and a negative as well.
How to build a financial management plan
First – We must understand the direction of cash to measure performance.
Where is it coming from, and who do we pay?
Let’s start talking about the cash that is coming into your business.
It comes from 3 major sources:
- PayPal– Payments from customers for buying products.
- PayPal– Positive fees in the event of refunds to customers.
- Credit cards – or any other way you pay your suppliers – in the event your supplier pays you back due to refunds made by customers.
Now, let’s start talking cash that is coming out of your business.
We can divide this section into 4 sources:
- Credit cards/gift cards or both– Payments to our suppliers for the items we purchase.
- PayPal – Negative fees for using PayPal services.
- eBay– Negative fees for using eBay services
- Costume spends – This section includes all the non-generic costs like using a warehouse, paying a VA, paying a market research software, and more.
Second – We must understand the relationship between the numbers in order to calculate the total profit.
For doing that I built an Excel file that looks like this:
Now, let’s fill in the data step-by-step:
- Income cash– Go to the PayPal monthly report and find this number in the ‘Amount Received’ column. Please see the attached video.
- Refunds – Go to the credit card report and find the sum of all the negative numbers that are relevant to your suppliers.
- Outcome cash – Go to the PayPal monthly report and find this number in the ‘Amount Received’ column.
- Refunded fees – Go to the credit card report and find the sum of all the positive numbers that are relevant to your suppliers.
- PayPal fees – Go to the PayPal monthly report and find this number in the ‘Fees’ column.
- Monitor – Write down the amount you are paying each month for your monitor or for any other market research software.
- Refunds – Go to the PayPal monthly report and find this number in the ‘Amount Received’ column.
- eBay fees– Go to your monthly eBay invoice and write down your fees. Please see the attached video.
- At last, the total profit – Now, all you must do is this:
- Add all the green numbers together to reach a total amount of 2169 euro.
- Add all the red numbers together into the total amount of 1643 euro.
- The total profit is 2169 less the 1630, giving a total value of 526 euro.
I did that calculation every month for one year. It was very hard for me to store all the data, manage all the numbers, and be sure that the calculation was correct.
Moving from manual to automatic calculation
Zik Analytics, the best research software in the world, created a unique tool that can show the total profit for each specific product.
You can find more details about Zik Analytics at the following link: https://www.zikanalytics.com/ebay-fee-calculator
It is a very useful tool when you want to evaluate the real profit for every product.
However, I wanted to create another tool – a platform that connects all your eBay stores and suppliers and, with one simple click, gives you the total profit of your drop shipping business.
About “My Profit”
Our website will do all the calculations for you. We know that all the numbers related to your business operations are very complicated and time consuming and, sometimes, they just don’t make sense.
This is the reason we created My Profit; to help you do it, calculate it, and learn from it.
We provide four major fetchers:
Dashboard – On the dashboard you will get a detailed screenshot about business activity and past performance.
You can choose any timeframe you would like to see.
Profit & loss report – We are going to show you a detailed report about your past performance. On that report you’ll learn the exact value of your business expenses, and the total amount of your monthly revenue your expenses account for.
Business trends – We are going to show you the trend of your business performance. On the ‘trend system chart’ we defined critical parameters so it will be very easy for you to identify gaps in month-to-month performance.
Business summary – We are going to summarize your yearly business performance. The monthly ‘drill down’ will help you recognize the gaps in monthly performance. The ‘yearly screenshot’ will provide you with a clear understanding of your selling trends.
You can access and enjoy our five FREE business plans here:
Nir Erlich – Myprofit
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