Blog · 24 September 2026 · 7 min read
How to calculate Amazon FBA profit (and why most products fail the maths)
It is basically never the idea that kills a first product. It is the number nobody checked properly. Here is the full cost stack, a worked example, and a free calculator that does it for you.
The formula, in one line
Profit per unit = selling price − product cost − shipping per unit − referral fee − FBA fulfilment fee − VAT on fees. Divide profit by selling price and you have your margin. Everything below is just explaining those six numbers, because each one has a trap in it.
The six numbers that decide everything
1. Selling price
Not the price you hope to charge: the price similar products actually sell at, after vouchers and promotions. Check the current Buy Box price of your five closest competitors and use the lowest sensible one. Optimism here poisons every number after it.
2. Product cost (landed, not quoted)
Your supplier's unit quote is never the real cost. Add packaging, inspection, and any duties. If a quote is $3.00 EXW (ex-works), your true unit cost by the time it is packaged and ready to ship might be $3.40. Use the true figure.
3. Shipping per unit
Total freight cost divided by units, not the courier headline. A £900 sea shipment for 500 units is £1.80 per unit. People routinely forget this line entirely, which alone can be 10 percentage points of margin on a £20 product.
4. Referral fee
Amazon's cut for selling on the marketplace: typically around 15% of the total sale price in most categories (some categories differ). On a £20 item, that is about £3 gone before anything else.
5. FBA fulfilment fee
What Amazon charges to pick, pack and post your item, based on size and weight. Small, light items are roughly £2 to £4; anything big or heavy climbs fast. Check the current rate card for your exact dimensions, because a few centimetres can move you up a band.
6. VAT
The one everyone forgets. If you are VAT-registered (or should be), VAT applies to the sale and to Amazon's fees. Even before registration, Amazon's fees to UK sellers include VAT. Model it in, or your "profit" is partly the taxman's.
A worked example
Say you sell a kitchen gadget at £19.99:
- Selling price: £19.99
- Landed product cost: −£4.10
- Freight per unit: −£1.80
- Referral fee (15%): −£3.00
- FBA fee: −£3.20
- VAT on fees: −£1.20
- Profit per unit: £6.69 (33% margin)
That product works. But drop the price to £17.99 to match a competitor and the margin falls to about 25%. Add £0.50 a unit of ads and it is borderline. This is why you run the maths before ordering, not after.
What margin should you accept?
Our blunt rule: under 15% net margin, walk away. Between 15% and 25%, only proceed if you can see a clear way to cut costs or raise the price. Above 25%, the product can absorb ads, discounts and the odd disaster. A spreadsheet margin that relies on everything going perfectly is not a margin.
Do it in 30 seconds instead
There is a free calculator on our homepage, no signup needed. Enter your price, product cost, shipping and fee estimates and it gives you profit per unit, margin, breakeven units and a straight verdict: whether the product is worth pursuing or whether to delete it and move on. It is the same maths as above, minus the spreadsheet.
And if you want the full system this calculator sits inside, product research, sourcing, launch and all, The FBA Ladder walks you through it one locked step at a time, starting at £1 for 7 days.
Frequently asked questions
- How do you calculate Amazon FBA profit?
- Take your selling price and subtract every cost: the product unit cost, shipping to Amazon per unit, Amazon's referral fee (around 15% of the sale price in most categories), the FBA fulfilment fee (based on size and weight), and VAT on the fees. What remains is your profit per unit. Divide that by the selling price for your margin percentage.
- What is a good profit margin for Amazon FBA?
- Aim for 25 to 30% net margin after all costs, before advertising. Below 15% you have almost no room for ads, price drops or returns, and one bad month wipes you out. Many successful private label sellers target a minimum of £5 to £10 profit per unit so the volume maths works at realistic sales levels.
- What fees does Amazon charge UK FBA sellers?
- Three main ones: a referral fee (typically 15.3% of the sale price in most categories), an FBA fulfilment fee per unit (based on the item's size and weight, roughly £2 to £4 for small standard items), and a monthly Professional account fee of £25 plus VAT. You may also pay storage fees and, longer term, aged-inventory surcharges.
- Why do most Amazon FBA products lose money?
- Because sellers check the margin before the real costs arrive. Unit costs creep up between quote and production, shipping per unit is higher than expected, and VAT on Amazon's fees gets forgotten. A spreadsheet margin of 40% routinely becomes 12% in reality, which is why you should stress-test the numbers with a proper calculator before ordering stock.
- Is there a free Amazon FBA profit calculator?
- Yes. The FBA Ladder has a free profit calculator on the homepage, no signup required. Enter your selling price, product cost, shipping per unit and fee estimates and it shows profit per unit, margin, breakeven units and a blunt verdict on whether the product is worth pursuing.