Import-export business profit calculation: a practical guide
A trade business can show a gross margin on paper and still lose money through freight, duty, finance cost, exchange-rate movement, claims or delayed payment. Calculate the complete transaction economics before confirming a quote.
1. Understand the basic measures
- Sales value: Amount invoiced to the buyer.
- Landed cost: Total cost of bringing imported goods to the agreed place, including relevant freight, duty, handling and other costs.
- Gross profit: Sales revenue minus the cost of goods sold, using a consistent accounting policy.
- Contribution: Revenue less variable costs attributable to the order.
- Net profit: Profit after operating expenses, finance cost, taxes and other applicable items.
Do not confuse markup with margin. If cost is ₹100 and selling price is ₹125, the markup on cost is 25%, but gross margin on sales is 20%.
2. Export pricing worksheet
Build the export cost from:
- 1Product purchase or manufacturing cost.
- 2Export packing, labelling and inspection.
- 3Inland transport and origin handling.
- 4Customs broker and documentation charges.
- 5Port, terminal or airport charges.
- 6Freight and insurance, depending on the agreed Incoterm.
- 7Bank, commission and finance charges.
- 8Currency-risk allowance and contingency.
Then add the target contribution or margin. Make sure the quotation states currency, Incoterm and named place, validity, quantity, payment terms and what is excluded.
3. Import landed-cost worksheet
For imports, include:
- Supplier invoice value and currency.
- Freight and insurance where relevant to customs valuation.
- Customs assessable value as determined under applicable rules.
- Basic customs duty and other applicable duties, cess or taxes.
- Port, terminal, customs broker and handling charges.
- Testing, certification, local transport and warehousing.
- Foreign-exchange conversion and financing costs.
- Expected defects, warranty and shrinkage.
The customs assessable value and tax treatment are governed by law; a simple spreadsheet estimate is not a substitute for a customs assessment.
4. Worked domestic resale example
Suppose an imported item costs ₹1,000 per unit from the supplier. Assume, purely for illustration, that freight, insurance, duties, clearance and local transport add ₹350, while testing and handling add ₹50. Estimated landed cost is ₹1,400. If the selling price is ₹1,750, gross contribution before overheads and finance is ₹350 per unit, equal to 20% of sales.
This is a mathematical illustration only. Actual duty, valuation, input tax credit, GST and accounting treatment depend on the transaction and applicable law.
5. Model cash flow, not just margin
Track deposit, balance payment, shipment date, customs clearance, customer credit period, inventory days and currency settlement. A profitable order can create a cash crunch if supplier payment is due before customer collection.
6. Stress-test the quotation
Run scenarios for freight rising 10%, currency weakening 3%, shipment delay, higher inspection cost, lower selling price and a partial claim. Decide the minimum acceptable price and working-capital requirement before accepting the order.
FAQs
What is a good import-export profit margin?
There is no universal benchmark. It varies by product, volume, risk, market and service level. Compare your actual contribution with the capital and risk involved.
Should freight be included in product cost?
It depends on the applicable accounting policy and whether it is attributable to bringing inventory to its present location and condition. Apply a consistent accounting treatment.
How do I calculate break-even?
Divide fixed costs for the period by contribution per unit, assuming a stable product mix and price. For multiple products, use weighted contribution.
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Illustrations are not tax or accounting advice. Confirm customs valuation, GST input-credit treatment and accounting policies with qualified professionals.