My marketplace app has been live for about 2 months now. Sellers list products with me, I handle the transactions, and then charge a 15% commission.
If I pulled in, say, $500 last month on commission, how do I figure out what my margin on that is?
My expenses are my time (I'm not paying myself anything) and my monthly hosting fees (about $40).
So, is my margin as simple as ($500 - $40) / $500?
I anticipate spending money on a graphic designer. When I do that, would that cost go against the margin?
What about PPC advertising? If I spend on that, where does that go?
There are a few ways you can calculate margin (Cost accounting vs GAP)
But for your purposes, you should probably use:
Your revenue is all collected money from your product.
Gross margin = (Revenue - Cost of goods sold) / Revenue
Always remember to pay yourself though. That's very very important.
So the way I could calculate your margin would go like this:
3 hours of labor at $50 an hour
$40 for hosting
$100 for designer
=$290 in Expenses (Cost of Goods Sold)
With $500 in collected revenue for the month we have:
$500 - $290 / $500 = .42 or 42%