How to calculate if I can make profit?
I am working a website where some people pay money for things that we sell and some people get money for services that they provide to us. Basically, from what others pay us, we pay others.
My question is, how can I estimate if our commisions are OK in order to make profit?
The plan is to have a PayPal service where people can pay (I know that PayPal has some comissions but I don't know if I'm aware of all especially because people from different countries can pay). That there is the problem of sending money to people which might again involve some comision because they might be in other countries.
Is there a formula for calculating this? What (hidden) factors should we take into account in order to get a realistic estimate of how much we can earn in different scenarios?
*Later edit: One extra questions: what costs should be taken into account when dealing with international sales and payments and what is a cheap way of doign this?
2 Answers
I personally feel a business plan is to heavy weight an exercise. You will be able to answer your question in an afternoon by compiling a simple breakeven analysis.
You want to be able to answer these types of questions quickly (break-even point) so that you have time to adjust your approach if needed.
There are lots of breakeven analysis templates available, just google. If you have basic excel skills you should probably be able to create your own.
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Yes, probably closer to what the question is asking. Still, to fill in some of the numbers there the questions I asked need to be answered. A full-blown business plan is probably the next step if one is looking for partners or other external backing. – Peter K. 13 years ago
What you need is a business plan. This will answer questions like:
- How many customers per week will we get?
- How much, on average, will each customer spend?
- How long does it take each customer (or paypal) to pay you?
- How much, on average, does it cost me to supply each customer?
- Paypal fees
- Shipping costs
- Sales tax, where applicable
- How much do I need to pay people?
- How much does my infrastructure cost? (computers, rent, utilities)
- Are there any other costs associated with the business? Advertising?
That should tell you what your income is, what your outgoings are, and the difference will be your profit (or loss).
I don't have much info about your last question.
