Unit economics: whether your product makes money is decided here
- You know ALL cost blocks of an FBA product — including the six beginners forget.
- You calculate net correctly and know the targets: margin ≥ 30 % before ads, ROI ≥ 100 %.
- You understand break-even ACOS and can derive your ad budget from it.
- You run the price stress test before ordering — not after.
There are good products in good niches that still burn money — because the calculation was three cost blocks too optimistic. This lesson is the foundation under everything you've researched so far. Calculate along as you read: the free FBA profit calculator uses exactly this lesson's logic.
1Think net first, then continue
The most common math error first: the VAT inside your gross selling price is not yours. At €24.99 and 19 % German VAT, €21.00 net remain — costs come off THAT (under standard VAT the tax is a pass-through: you remit it and reclaim input VAT from purchases and imports, see lesson 2). One exception: Amazon's referral fee is calculated on the gross price.
Two calculations, same product: take the €14.08 of costs from the worked example below and subtract them from the gross price — €10.91 profit, seemingly 44 % margin. Calculated correctly (from net, €21.00), €6.92 and 33 % remain. The €3.99 difference is exactly the VAT — money that was never yours. This is precisely how products end up profitable “on paper” only.
2The complete cost list
| Block | What belongs in it | Typical trap |
|---|---|---|
| Product costs | purchase price + freight per unit + duty (on goods + freight) + quality inspection | “forgetting” freight — air freight quickly adds €1–3 per unit |
| Amazon | referral fee (usually 15 % of gross) + FBA fulfilment fee + monthly storage | estimating the FBA fee instead of checking Amazon's revenue calculator |
| Side costs | custom packaging, inserts, EAN, packaging-register share, account fee share | sounds small, adds up to €0.30–0.80 per unit |
| Returns | rate × (lost value + handling); 2–15 % depending on category | calculating with 0 % — even good non-fashion products run 2–5 % |
| Advertising | PPC cost per unit sold (high at launch, lower later) | not budgeted at all — yet a launch without PPC is hopeless |
3Worked example: the €24.99 product
| Position | Amount |
|---|---|
| Selling price gross | €24.99 |
| — net (÷ 1.19) | €21.00 |
| Purchase | − €4.50 |
| Freight per unit (sea) | − €1.20 |
| Duty 4 % on goods + freight | − €0.23 |
| Amazon referral fee 15 % of gross | − €3.75 |
| FBA fulfilment fee | − €3.90 |
| Side costs (packaging, storage, EPR …) | − €0.50 |
| Profit before ads | €6.92 (≈ 33 % margin) |
| Advertising (average across all sales) | − €2.00 |
| Profit after ads | €4.92 (≈ 23 % margin) |
Add the ROI (profit ÷ capital employed per unit): €6.92 ÷ €5.93 landed cost ≈ 117 % — every euro invested returns with €1.17 profit before ads. This is a healthy first product. (Returns were left out here for clarity — the calculator includes them.)
4The target values
- Margin before ads: at least 30 %. Below that, the launch phase can't be carried — PPC in the first quarter almost always costs more than the later average.
- Margin after ads: at least 20 % in steady state — your buffer for promotions, fee increases and mistakes.
- ROI: at least 100 % for a first product. Your capital is locked for months (production + freight + sell-through) — it must double per cycle, or better uses exist.
- Sourcing rule of thumb: landed cost (purchase + freight + duty) below ~30 % of the net selling price. Then the targets fall into place almost automatically.
Margin and ROI answer two different questions. Margin asks: how much is left from every unit sold? ROI asks: how hard is my invested money working? A product can have a 40 % margin and still a weak ROI if it is expensive to buy — and vice versa. That is why you always check both values, never just one.
5Break-even ACOS: the bridge to advertising
ACOS (“Advertising Cost of Sales”) is the share of revenue you spend on ads. Your break-even ACOS tells you where ads start losing money: profit before ads ÷ gross selling price. In the example: 6.92 ÷ 24.99 ≈ 28 %. If your campaign runs above 28 % ACOS permanently, every advertised sale loses money. Remember this number — in the Growth track it becomes your most important control value.
Picture the profit before ads as a budget envelope: for the €24.99 product it holds €6.92 per sale. Advertising may help itself from this envelope — €6.92 out of €24.99 revenue is exactly that 28 %. Once the envelope is empty and the campaign keeps spending, you pay for every click out of your own pocket.
6The price stress test
- Target price (your calculation base),
- Target price − 15 % (competitors react to your launch — happens regularly),
- Promo price (launch coupons, deals: does the margin survive a 20 % promotion?).
If your product only works at the target price, it doesn't work. Healthy products stay above 20 % margin before ads even in the second scenario.
Stress test for the €24.99 product at −15 %: new price €21.24 gross, i.e. €17.85 net. The referral fee drops along to €3.19; all other costs stay (purchase €4.50, freight €1.20, duty €0.23, FBA €3.90, side costs €0.50). Result: €4.33 profit before ads ≈ 24 % margin — test passed. A product with a €6.00 FBA fee instead of €3.90 would already have slipped below 13 % in the same scenario.
7Cash flow is not profit
Profitable on paper, empty on the bank account — that's how the first FBA year often feels. The reason: you pay production and freight months before the first euro returns, and the reorder is due while the first order is still selling. Plan from day one: when is the reorder due (production + freight time!), and is the money ready? The detailed tools come in the inventory & cash-flow lesson — but the planning starts today.
500 units at €5.93 landed cost tie up around €2,965 of capital: a 30 % deposit on the goods in week 0, the rest plus freight and duty shortly after arrival — while selling only starts in week 12. At 10 units sold per day, the stock is empty after a good 7 weeks. The reorder again needs 11–12 weeks of lead time — so you would practically have to place it the moment the first delivery arrives, paid from money that has not yet flowed back.
The “purchase times three” fallacy: buy at €4.50, sell at €24.99 — “five times the money, can't go wrong”. Then freight, duty, 15 % referral fee, FBA, returns and PPC arrive — and five times the money becomes €4.92. Always run the full list, never just purchase vs. selling price.
The free FBA profit calculator runs exactly this calculation with your numbers — margin, ROI and break-even ACOS included, right in your browser.
Open the FBA calculator- FBA fee looked up in Amazon's revenue calculator (not guessed).
- All five cost blocks captured — including returns and advertising.
- Calculated net; referral fee on gross.
- Margin before ads ≥ 30 %, ROI ≥ 100 %.
- Break-even ACOS noted (for the advertising chapters).
- Stress test at −15 % price passed.
- Cash plan: reorder dated and fundable.
8Expert insight: capital turnover — the annual return behind ROI
Margin and ROI answer what a product earns per unit and per cycle. The third, decisive number is one hardly anyone calculates: how many times per year your capital completes that cycle. The formula is simple:
Annual return on capital ≈ ROI per cycle × (365 ÷ cycle length in days)
The cycle runs from deposit to sell-through of the order: roughly 80 days of production plus sea freight, plus the sell-through time. This is exactly where the order quantity becomes a return decision — same AURELO numbers, two scenarios (assumptions: a constant 10 sales per day, profit after ads, capital tied up for the full cycle):
| 500 units at €4.50 | 1,000 units at €4.20 | |
|---|---|---|
| Landed cost per unit | €5.93 | €5.62 |
| Profit after ads per unit | €4.92 | €5.23 |
| Capital tied up | €2,965 | €5,620 |
| Cycle length (80 days lead + sell-through) | 130 days | 180 days |
| ROI per cycle | ≈ 83 % | ≈ 93 % |
| Annual return on capital | ≈ 233 % | ≈ 189 % |
The uncomfortable result: the 1,000-unit order has the better unit price AND the better ROI per cycle — and still every euro invested works about a fifth worse across the year, because it sits locked up 50 days longer. Volume discounts are always bought with capital lockup.
- Rule 1: never compare order quantities or product ideas on margin or ROI alone, but on ROI × turns. An 80 % ROI product on a 120-day cycle beats a 150 % ROI product that needs 300 days (243 % vs. 183 % per year).
- Rule 2: deliberately cap the sell-through time per order — target corridor 90–120 days, hard limit 180: from day 181 in the FBA warehouse, long-term storage fees pile on top, so beyond that line the annual return drops twice over.
- Rule 3: weigh the fixed costs per order against the turnover gain (quality inspection ~€300, freight side costs): very small, very frequent orders eat the advantage back up — and every additional order is one more out-of-stock risk.
The math is linear on purpose: constant sell-through, no reinvestment compounding, capital counted as tied up for the full cycle (conservative — in reality the 70 % is only due at completion). These refinements almost never change the ranking of scenarios, but they do change the absolute percentages. Use the number to compare, not as a promised return.
The first lessons of every track are open to everyone. From here on you just need a free account — no subscription, no costs.
- 2The complete cost list
- 3Worked example: the €24.99 product
- 4The target values
- 5Break-even ACOS: the bridge to advertising
- 6The price stress test
- 7Cash flow is not profit
- 8Expert insight: capital turnover — the annual return behind ROI
- ✓Quiz: 6 questions with instant feedback
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Frequently asked
Where do I find the exact FBA fee for my product?
In Amazon's official revenue calculator (in Seller Central or public): enter dimensions and weight and you get the exact fulfilment and referral fee. Mind the peak-season surcharges (mid-October to mid-January) — calculate with the Q4 value if your launch falls there.
Do I really have to strip VAT out of the selling price?
Under standard VAT, yes — the 19 % belongs to the tax office and is a pass-through for you. The classic beginner mistake is calculating with the gross price: the margin then looks several points better than it is.
How much ad cost per unit should I plan long-term?
A proven planning value: 8–12 % of the gross price in steady state (~€2–3 on the €24.99 example), considerably more during launch. Your personal value later comes from TACOS in the KPI cockpit — until then, plan conservatively.
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