Questions

How much profit margin should I be targeting to make on a Magento project or e-commerce project?

I have no idea how much profit I should be trying to make with my small boutique digital ecommerce agency. We design and develop ecommerce websites on the Magento and Shopify platform.

3answers

There are a number of ways you could go with this:

Cost+: Close to what you are suggesting: Calculate your hourly cost, add a profit. Then define your projects with your client, and estimate number of hours of work. That would be your price - like craftspeople do it. The pro for this approach is, that you let your own cost determine your price, which is very inside-out making it easier for you to justify your hourly pay. But the con is, that your customers will challenge your estimate, and you will spend a lot of time quantifying projects. But if you don't know yet how much time each project will take, this could be a way to start off. Benchmark against market price, though or find the price sensitivity of your customers.

Create products: When you have more knowledge of clients needs and time used for development, you could package your development into products and charge for that. Small - Medium - Large with a development price for each. You could do it as a one-off, or you could integrate it with a maintenance model - see next.

SaaS-model: You could integrate your site development with maintenance, provide SEO and similar service. That would make it very convenient for your customers, and create an ongoing cash flow for you as a subscription fee. Either as a fixed monthly fee or as part of the cash flow through the website, if you want to share risk and upside.

But no matter what you do, make sure you know the delivery of your competitors. Where are you unique in your delivery? What do your competitors charge? Unless you deliver something truly unique, you have to be within the same price range.

I hope some of this could work for you. If you want to discuss your pricing possibilities further, feel free to mail me or set up a call.

Best regards

Kenneth Wolstrup


Answered 5 years ago

That depends on what you are doing and what is your target market..

The question is kinda vague but let me give you some tips..

If you are targeting a mass production / low cost strategy , your profit margin Per Sale is very low, but as mentioned it is a mass production / sale thing , so you need to make sure first you have the large market and reach your break even point, may be after a couple of thousands sale.

If you are selling a differentiated pricy product, your profit margin is really high. But you sell fewer items.

Another important factor, who is your customer ? What is the market segment your are targeting ?

Your production cost ? Shipment ? are you selling a software product for example ( so in this case the cost per unit is negligible ) ? Or selling a physical product ( so you have a cost per item.. ? )

This is a start.. You should look for a detailed analysis after providing enough info.

Reach me if you need more support and good luck !


Answered 5 years ago

I recommend at least tripling your estimated cost on the project. Tripling allows you to have a potential fallback option if your plan A doesn't work out and gives you enough profit to be able to invest in your business and pay yourself.


Answered 4 years ago

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