The margin math a reseller must do before setting a price

A reseller price has two numbers behind it, and they are easy to confuse. A markup is added to cost. A margin is measured against the selling price. A 20 percent markup on a cost of 2.00 gives a price of 2.40 and a gross profit of 0.40. The margin on the selling price is 0.40 divided by 2.40, which is 16.7 percent. The two figures describe the same sale, and only one of them tells you what share of revenue is left to cover fees, refunds and fixed costs.

The confusion is expensive because the costs that follow are measured against revenue, not cost. A payment fee is a share of the charge. A refund is a share of the charge. A fixed monthly cost is divided by the number of orders. A reseller who sets a 20 percent markup and then loses 27 percent of revenue to refunds is selling at a loss, even though every order looked profitable before the refund. This page does that arithmetic in the open.

Markup on cost and margin on revenue

The panel's own rule is a margin on supplier cost. The sell price is the cost multiplied by one plus the margin, rounded up to the panel's price step. The stated margin is 20%. At the median Instagram followers rate, the implied supplier cost is $0.6125 per 1,000 and the gross profit is $0.1225. The margin on the selling price is 16.7%.

The gap between 20 percent and 16.7 percent is not a rounding error. It is the difference between a number measured on cost and a number measured on revenue. If a reseller wants a 20 percent margin on revenue, the markup on cost has to be 25 percent, because 1 divided by 0.8 is 1.25. The business allows a margin of up to 40% on cost, which is 28.6% on revenue. The gap between the floor and the ceiling is the room a reseller has to price.

The formula for a target margin on revenue is price equals cost divided by one minus the target margin. The formula for a target markup on cost is price equals cost multiplied by one plus the markup. Both are correct. They answer different questions. A reseller who uses the first formula with a number from the second underprices the order.

The cost stack after the supplier

The supplier cost is the first line, not the last. A card payment adds a processor fee. The published US card price used here, read on 7 November 2026, is 2.9 percent plus 30 cents per successful domestic transaction. Currency conversion adds a spread if the charge and the settlement are in different currencies. A refund adds the cost of the undelivered share and, sometimes, a processor fee that is not returned. Support time and fixed monthly costs sit on top.

The fixed part of the payment fee is the line that hurts small orders. On a 1,000 unit order at the median rate, the charge is $0.735 and the gross profit is $0.1225. The card fee is $0.33, which is 269.4% of the gross profit. The net profit is $-0.2075.

At 5,000 units the same fee is a smaller share. The charge is $3.675, the gross profit is 5 times the 1,000 unit profit, and the card fee is $0.41. The net profit is $0.2025. The fee did not change much. The order did. That is why a reseller who sells only small orders needs a minimum quantity or a small-order fee, and a reseller who sells large orders can absorb the fixed cost.

The refund test

A refund is a share of revenue that leaves after the cost has already been paid. If the undelivered share is 27 percent of an order, the reseller keeps 73 percent of the charge and still owes the supplier for the delivered share. At a 20 percent markup, the supplier cost is 83.3 percent of the charge. The difference is a loss of 10.3 percent of the charge, before any payment fee.

Put the numbers on one order. A 10,000 unit order at the median rate is charged at $7.35. The supplier delivers 7,300 units, so the reseller refunds $1.9845 and keeps the rest. The supplier is still paid for the delivered share. A reseller who set the price at a 20 percent markup has a gross profit of 16.7 percent of the charge, and the refund is 27 percent of the charge. The refund is larger than the margin.

This is the number a reseller must check before setting a price: the margin on revenue has to exceed the expected refund rate. The gross margin is 16.7% of revenue. If refunds run above that share, the average order loses money. The refund destinations guide covers which remedy applies, and the refund and queue guide covers the clauses that decide the amount.

The worked example uses the median rate in the market table at render time. The arithmetic is shown so you can repeat it with your own quantity.

How many orders a refund erases

The loss is easier to see as a count. The gross profit on a 1,000 unit order is $0.1225. One 2,700 unit partial refund at the same rate is $1.9845. Divide the refund by the profit and round up: 17 profitable orders are needed to cover one partial refund of that size.

The count is the reason a reseller cannot price on the average alone. A run of clean orders can hide a refund rate that is larger than the margin. The reseller sees a profit on each clean order and a loss on each refund, and the average is decided by the mix. A reserve, a higher price or a stricter service selection are the three levers. The reserve is the simplest: set aside the expected refund share before counting the profit.

The count also shows why a small order is not a small risk. A 1,000 unit order has a small profit and a fixed card fee. A 2,700 unit refund is more than 16 times that profit. The order size that produces the profit is not the order size that produces the refund. A reseller who sells many small orders and one large refund can lose the margin on many orders in a single event.

Pricing backward from a target margin

Start with the margin on revenue you need, not the markup you like. If the target is 25 percent of revenue, the price is cost divided by 0.75, which is 1.333 times cost. If the target is 16.7 percent, the price is cost divided by 0.833, which is 1.2 times cost. The second is the panel's stated markup. The first is a higher price for the same cost, and it is the price that survives a refund rate near the example.

The target should include the payment fee and the refund reserve, not just the supplier cost. A simple version is: price equals supplier cost divided by one minus the target margin, then add the fixed fee per order. A more precise version uses the actual fee and the actual refund rate. Both are more accurate than a markup that ignores the lines after the supplier.

The market sets a ceiling. A price far above the market median loses orders to panels that quote lower. The room between the cost and the market is the reseller's margin, and it is smaller than the range of listed rates. The pricing guide explains the cost stack behind the median, and the reseller page describes the programme terms.

The same order at three sizes

The card fee does not scale, so the order size changes the net profit. At 1,000 units the charge is $0.735, the card fee is $0.33, and the net profit is $-0.2075. At 5,000 units the charge is $3.675, the card fee is $0.41, and the net profit is $0.2025.

At 10,000 units the charge is $7.35, the card fee is $0.52, and the net profit is $0.705. The fee grows by cents while the profit grows by dollars. A reseller who sells only the small order is running a business with a 3 cent margin per order. A reseller who sells the large order has room to absorb a refund.

The comparison is not an argument to sell only large orders. Large orders carry a larger refund exposure and a larger support cost. The comparison is an argument to know which order size pays the fixed costs. If the small order is the product, the price has to include the fixed fee. If the large order is the product, the price can be closer to the market rate.

The refund reserve as a price line

A refund reserve is the share of revenue set aside for the undelivered part of orders. It is not a fee the panel charges. It is a cost the reseller carries, and it belongs in the price. If every order were refunded at the 27 percent undelivered share in the example, the loss would be 10.3% of the charge at the stated margin. That is a stress case, not a forecast. It shows the direction and the size of the gap.

The reserve can be priced in two ways. The first is a higher margin on every order, so the clean orders pay for the refunded ones. The second is a service selection rule, so the reseller avoids the services with a high partial rate. The first is a price decision. The second is an operations decision. A reseller who does neither is relying on the average to be kind, and the average is made of the mix.

The reserve also has a timing cost. A refund is paid after the charge, so the cash is gone before the credit returns. A reseller with a thin balance can run out of cash even when the annual margin is positive. A reserve held in the business, not spent on the next order, is the buffer. The refund destinations guide explains why a wallet credit and a cash refund have different timing.

A price sheet you can repeat

A price sheet is a small table with four columns: the supplier cost, the target margin on revenue, the price, and the net after the fee and the reserve. The first column comes from the panel. The second is a business decision. The third is the formula. The fourth is the check. A sheet with all four is a price. A sheet with only the first two is a hope.

The formula is the same at every size. Price equals cost divided by one minus the target margin, plus the fixed fee per order. The target margin should be above the refund reserve and above the payment fee as a share of revenue. If the target is below either, the price is subsidising the risk. The price per 1,000 guide shows how the charge is calculated from the rate and the quantity.

The market ceiling is the last check. A price above the market median has to be justified by a service, a speed or a support level the market does not offer. A price below the market floor has to be explained by a cost advantage. A price inside the range is a price the market can accept. The price index shows the range.

A checklist before you publish a price

1. Convert the markup to a margin. Markup divided by one plus markup is the margin on revenue. Write both numbers down.
2. Add the payment fee. Use the published rate and the fixed amount. Calculate it on the minimum order you sell.
3. Add the refund reserve. Multiply the charge by the expected undelivered share. Compare it with the margin.
4. Add the fixed cost. Divide the monthly fixed cost by the number of orders you expect. Add it to the per-order cost.
5. Check the market ceiling. Compare the result with the market median. If the price is above the range, the margin has to come from a different service or a different customer.
6. Test one small order. Place one minimum order at your price and follow it through payment, delivery and a refund. The arithmetic is a model; the order is the evidence.

Four profit numbers for the same order

Number	What it includes	What it leaves out
Markup on cost	Supplier cost and the added percentage	The payment fee and the refund
Margin on revenue	The gross profit as a share of the charge	The payment fee and the refund
Net after the card fee	The gross profit minus the processor fee	The refund and the fixed cost
Net after the refund reserve	The gross profit minus the fee and the expected refund	The fixed cost and the support time

A qualitative comparison. The figures used in the worked examples are in the data table below.

The ladder runs from the number that looks bigger to the number that is actually left. A reseller who stops at the first rung is pricing a supplier cost. A reseller who reaches the last rung is pricing a business. The difference is the reason a 20 percent markup can produce a 3 cent profit on a 1,000 unit order and a loss on the first partial refund.

For the price formula, read how to read a price per 1,000. For the refund side, read refund policies compared. The programme terms are on the reseller page, the cost method is on the methodology page, and the API is documented at API documentation.

Figures marked with a data key are read from the Talon database, the policy module, the money module or the order module when this page is rendered. A dated external fact carries its source link and the date it was read.