Make smarter ecommerce decisions
A clear grasp of profit, margin, markup, and advertising efficiency turns pricing from guesswork into a repeatable growth system.
What is Profit Margin?
Profit margin is the percentage of revenue left after costs. Net margin accounts for product, shipping, advertising, transaction fees, taxes, and discounts. A positive margin means each order contributes profit; a negative margin means each order loses money.
How to Calculate Profit
Subtract every variable cost from revenue: Profit = Revenue − Product Cost − Shipping − Advertising − Payment Fees − Tax. Then calculate margin as Profit ÷ Revenue × 100.
What is Markup?
Markup shows how much you add to cost to reach a selling price. If an item costs $60 and sells for $100, the $40 profit is a 66.67% markup on cost.
Markup vs Margin
Markup uses cost as its base; margin uses revenue. The same $60-to-$100 example has 66.67% markup but a 40% margin. Use margin for profitability reporting and markup for cost-based pricing rules.
Break-even ROAS Explained
Break-even return on ad spend is average order value divided by profit before ads. With a $100 order and $40 available before ads, maximum CPA is $40 and break-even ROAS is 2.5×.
Practical Example
A $100 order with $35 product cost, $8 shipping, $15 ads, a 2.9% fee, and no tax or discount produces $39.10 profit, a 39.1% margin, and roughly 64.2% ROI on total costs.
Tips for healthier margins
- Review contribution margin by product and channel, not only store-wide averages.
- Include returns, packaging, fulfillment, and payment fees in real-world planning.
- Test discounts against profit before launching promotions.
- Set target ROAS above break-even to leave room for overhead and growth.
Frequently asked questions
What is a good ecommerce profit margin?
It depends on the category, operating model, and growth stage. Track both gross and net margin, then compare performance with your own historical data and relevant category benchmarks.
Does revenue include discounts?
In this calculator, revenue is the selling price after the entered discount. Percentage-based fees and tax are then calculated on that discounted revenue.
What is break-even ROAS?
Break-even ROAS is the revenue-to-ad-spend ratio at which profit after advertising is zero. A campaign must exceed it to be profitable under the entered assumptions.
Is markup the same as margin?
No. Markup divides profit by cost, while margin divides profit by selling price. The same transaction therefore produces different markup and margin percentages.