What is a Handling Fee?

Part of knowing what the cost of your products should be is understanding what a handling fee is and how much you should be charging. If your handling fee is calculated too low, too high, or maybe even nonexistent, then there’s a good chance your business is hurting (or at least not doing as well as it could be). While understanding what the cost of your product is and how much you should charge the consumer is typically straightforward, handling fees can be a little more difficult to calculate. Of course, that doesn’t mean you should simply guess, or ignore handling fees altogether.

Handling fees themselves are fairly simple to understand. By definition, a handling fee is what a customer is charged in order to cover expenses not related to the product or shipping. Instead, handling fees take into account more of the fulfillment process, including things like:

  • Product storage costs
  • Packaging costs (including shipping materials)
  • Time costs (including prepping and packing products)

Knowing the numbers for each of these items and keeping track of them each month will help give you a straightforward, accurate number for your business’s handling fees. While the first three bullets typically come with a standard fee that’s charged, time costs can be a little more difficult to calculate. In order to include this aspect of handling fee costs in your total amount, you can use the simple calculation process below:

  1. How long does it take to prep each product for shipping?
  2. Take the answer and then divide it by 60.
  3. Use that number and then multiply it by the rate you charge hourly for that work to be done.

That final number is a good estimate of part of what you should be charging for your handling fee. Remember, you still want to be including storage costs and packaging costs, too.

For a lot of online sellers and businesses, the majority of the product prep and shipping is done personally, which sometimes makes them forget to charge handling fees altogether.

If I’m not paying someone for this work, I don’t have any expenses, which means I don’t need to charge my customers extra!

Of course, that isn’t the case. Your time is valuable (and so is the money you put in for packaging, etc.) and you absolutely need to be charging a handling fee to help cover that expense. If you don’t know these handling fee numbers right now, start paying attention to your expenses right now.

  • How much does it cost to prep a product?
  • How much do you pay for packaging materials (including tape, boxes, envelopes, etc.)?
  • How long does it take you to package and ship a product?
  • How much would you pay someone else to do this work hourly?

Charging the right amount for your handling fee will help your business thrive and ensures that your prices are sustainable and profitable.

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