Day 117
10:59 AM
Got rug pulled.
Great motivation to work quicker.
Main % of e-com sales come from UK.
Problem is VAT is 20%.
Therefore, for any e-commerce business with net profit margins less than 40%, the government makes more than you make per sale.
Ha... ha...
ha..
Absolutely fucked.
My margins are less than 40%
COGS
12.50+1.70+2.90 = 17.1
TRANSACTION FEE
2
TOTAL FEE PER ORDER = 19.1
REVENUE = 43.98
43.98-19.1 = 24.80 === $32.82
AD COST == $20-25
$7-8 profit per order, yes?
No
VAT 20%
Now we're losing money every sale
Include VAT in price?
Sure sure, now conversion rate decreases.
Cost per purchase now $32
Which idiot came up with VAT is beyond me.
Is 20% of net profits w/ corporation tax not enough?
You can reduce it slightly with subtracting VAT from suppliers but that's not even close.
Solution:
Don't sell in the UK.
Sell digital products in the US. Subscription. Repeat purchases. As I was planning on doing...
Edit:
Solved VAT by including VAT in price. Will only have to pay £6.60 ish and then I’ll figure rest out by increasing average order value by upsell/cross sell.