How to calculate profit per order in an online store (with a real example)
Revenue minus product cost is not profit. To know whether an order makes money you need every cost attached to it.
The formula
Net profit per order = revenue − product cost − platform and payment fees − shipping you pay − packaging − ad cost per order − returns allowance.
Example
Assumptions: item $40 plus $5 shipping charged, product cost $15, shipping you pay $5, packaging $1, ads $6 per order, platform and payment fees 10% of $45, and 8% of revenue lost to returns and refunds.
| Line | Amount |
|---|---|
| Revenue (40 + 5) | $45.00 |
| Fees (10%) | −$4.50 |
| Product cost | −$15.00 |
| Shipping paid | −$5.00 |
| Packaging | −$1.00 |
| Ads per order | −$6.00 |
| Returns allowance (8%) | −$3.60 |
| Net profit | $9.90 |
That is a 22% net margin on $45 of revenue. If you only subtracted product cost and fees you would see $25.50 of profit and badly overprice your ads.
Skip the maths, try your own numbersE-commerce Net Profit CalculatorFree, instant, no sign-up →Numbers worth tracking
- Margin: profit ÷ revenue.
- Break-even ad spend: your profit before ads is the most you can pay to get one order. Here that is $15.90.
- Return rate: even a few percent changes the result.
Replace the sample figures with your own in the calculator below to see your real profit per order.
Gross margin vs net margin
Gross margin subtracts only the product cost. Net margin subtracts all the costs tied to the order. In the example above, the gross margin before fees is $30 on $45 of revenue, 66.7%, but the net margin is 22%. Decisions about advertising and pricing should use net margin per order.
Break-even ROAS: how much can you spend on ads?
ROAS (return on ad spend) is revenue divided by ad spend. Your profit before ads is $15.90 per $45 order, which is 35.3% of revenue. The break-even ROAS is 1 ÷ 0.353 = 2.83. If you earn less than $2.83 of revenue per $1 of ads, you lose money on those orders. At the example's $6 ad cost per order, ROAS is 7.5, which is comfortable.
Scenario: what if ad costs double?
| Scenario | Ad cost per order | Net profit |
|---|---|---|
| Base case | $6 | $9.90 |
| Ad costs double | $12 | $3.90 |
| Ad costs $16 | $16 | −$0.10 |
The business becomes unprofitable when the ad cost approaches $16. This is why you should know your limit before you scale a campaign.
Scenario: raise the price by $5
Charging $45 plus $5 shipping, revenue is $50. Fees at 10% are $5, product cost is $15, shipping $5, packaging $1, ads $6 and returns at 8% are $4. Net profit is $14, a 28% margin, up from $9.90. Test price changes carefully, since higher prices can reduce conversions.
The hidden costs people forget
- Payment processing fees, including fixed amounts per transaction.
- Return shipping and the loss of unsellable items.
- Chargebacks and fraud.
- Cash-on-delivery refusals and return-to-origin shipments in markets where COD is common.
- Software subscriptions and apps.
- Customer support time and packaging inserts.
- Currency conversion when you sell in more than one currency.
Fixed costs and monthly break-even
Per-order profit is not your total profit. Subtract fixed monthly costs such as store subscription, tools and salaries. Divide fixed costs by profit per order to find the number of orders you need each month. For example, $1,500 of fixed costs at $9.90 per order needs about 152 orders.
Track the right numbers every week
- Net profit per order and net margin.
- Blended and per-channel ad cost per order.
- Return and refund rate.
- Average order value.
- Repeat customer rate and customer lifetime value.
Using the profit calculator
Enter your price, shipping charged, product cost, fees, shipping paid, packaging, ad cost and return rate. Change one input at a time to see which has the biggest effect on profit.
Troubleshooting: common problems and fixes
- Profit looks high but cash is low. Profit is not cash. Stock purchases, ad spend paid up front and delayed payouts affect cash flow.
- Ad costs vary a lot by day. Use a weekly average, and track cost per order by channel.
- Return rates are unknown. Start with an estimate of 5% to 10% for your category, then replace it with real data.
- Marketplace fees changed. Update the fee percentage and fixed fees in the calculator.
- Shipping cost differs by order. Use the average shipping paid, or calculate by zone for large differences.
How accurate is this?
The calculation is simple arithmetic on the numbers you provide, so it is as accurate as your inputs. Use real fee statements, actual ad cost and your measured return rate. It does not include tax, which depends on your country and business type. Your data stays in your browser.
More free Zyphub tools you may need
- E-commerce Net Profit Calculator: Real profit per order after all costs.
- Marketplace Fee Calculator: Amazon, eBay and Etsy fees and payout.
- Product Pricing & Break-even Calculator: Selling price, margin and break-even point.
Frequently asked questions
How do I calculate profit per order?
Revenue minus product cost, platform and payment fees, shipping you pay, packaging, ad cost per order and a returns allowance.
What is break-even ROAS?
It is 1 divided by your profit margin before ads. If your margin before ads is 35%, break-even ROAS is about 2.86.
What is a good net margin for ecommerce?
It varies by niche. Many stores aim for 15% to 25% net after ads, but your costs and strategy decide what is healthy.
Should I include returns in profit calculations?
Yes. Returns reduce revenue and may add shipping and lost stock costs, so include a returns allowance based on real data.
How many orders do I need to cover fixed costs?
Divide monthly fixed costs by your profit per order.
What is a good profit margin for an online store?
It depends on the niche, but many stores aim for 15% to 25% net after ads. Compare with your own break-even.
Do I include my time as a cost?
For a clear picture of the business, yes, at least as a notional wage, though the calculator shows cash profit per order.