Have you ever calculated what the real cost of shipping a product is?

If you haven't, you should - especially if you ship products to your customers.

The reason is that when you ship a product you incur a number of costs in addition to the actual shipping fee. These include

labor costs for the time it takes to get the package ready to ship; packaging materials such as boxes, filler, shrink-wrap; and floor space for the tables and equipment used to do the packing.

If you aren't aware of these costs, and don't add them into the price of your item, or tack them on to shipping as a "handling" charge, you're reducing your profit - or potentially losing money on every single sale.

The out-of-pocket costs for fees and packaging materials are pretty obvious, of course, and relatively easy to calculate. Less obvious and sometimes more difficult to determine for a very small business, is the cost of the labor to enter orders and get the orders ready to ship.

To calculate this cost, time how long it takes to enter an average order, print the shipping label, packing slip, invoice, transfer the order information to customer and accounting files, and to wrap the item or otherwise prepare it for mailing. If those processes take a total of 10 minutes per order, your staff will only be able to fill 6 order per hour. Assuming time off for lunch and breaks and interruptions, each person could probably fill no more than 35 orders per day or 175 orders per week. If the salary and payroll expenses for that person cost $420 a week, your cost per order for labor will be $2.40. Be sure you get that money back by tacking on a handling charge or by adding the cost to the selling price of your merchandise.

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