Margin shows you what percentage of the price remains as profit after deducting costs. Unit Economics is the analysis of how profitable it is to sell one specific product (one "unit") considering all direct costs. If you are not making money per unit, you won't save the business by selling more.
Why#
Many calculate margin incorrectly — they subtract only the purchase price from the selling price, which is actually called markup. Not knowing the real margin leads to a situation where, despite many orders, there is no money left in the account at the end of the month. Understanding unit economics protects you from hidden money loss.
Steps#
- Calculate revenue per unit: This is the price the customer pays for your product.
- Subtract all variable costs: Purchase price, shipping, payment commission, and packaging. For example: 50 GEL (selling price) - 20 GEL (purchase) - 5 GEL (shipping) = 25 GEL.
- Calculate advertising cost: If it took 10 GEL of advertising to sell the product, your net profit per unit is 15 GEL.
- Calculate margin percentage: Divide 15 GEL by 50 GEL (selling price) and multiply by 100. Your margin is 30%.
- Simplify the process: The Sellit Start plan costs 59 GEL per month (source: sellit.ge/llms.txt) and offers a 0% sales commission, meaning your calculated margin stays entirely with you.
Common Mistakes#
- Confusing margin and markup: Margin is calculated from the selling price, while markup is from the purchase price.
- Forgetting advertising cost: Sales without advertising are rare, and this cost is often the largest per unit.
- Ignoring returned products: The cost of returns must be covered by the margin of realized products.
Your Step Today#
Calculate the margin of your best product using the formula above, or enter the same figures in the margin calculator. If the margin is too low, consider increasing the price or reducing costs.