Shopify shows you revenue. Revenue is the easy number. What decides whether a store is a business is what's left after the product, the label, the processor, the returns and the ads — and those five numbers live in five different places.
Put them in one place below. The defaults describe an ordinary $40 order, and they add up to a loss — which is the point of the exercise.
−8.2% net margin · −$371/month at 100 orders
The formula
Gross profit = Revenue − COGS − Shipping cost − Payment fees Net profit = Gross profit − Packaging − Returns − Advertising − Other
Revenue means everything the customer paid you, including the shipping they were charged. Every line under it is money that leaves on the same order.
The three costs that get skipped
Most merchants compute the gross line correctly and stop there, which is why so many stores feel profitable and aren't. Three costs sit below it.
- Returns. If 8% of orders come back and each one costs you $20 in return shipping and unsellable stock, that's not an 8% problem on one order — it's about $1.60 onevery order, forever. Spread it, don't wait for it. (How to reduce returns.)
- Pick, pack and packaging. The box, the tissue, the insert, the minutes. It feels like noise; in the default above it's 6% of the order.
- Advertising. The largest variable cost most DTC stores have. Divide last month's total ad spend by last month's order count and apply it to every order, including the ones from returning customers. That blended number is the honest one while you're small.
Reading the two break-even numbers
Break-even ad spend is the most you can pay to acquire one order before that order stops making money. It is your ceiling on cost per purchase, and it is a far more useful target than a generic ROAS goal, because it comes from your own costs.
Break-even ROAS turns the same number into the figure your ad platform reports: revenue divided by that ceiling. With the defaults above you need about 2.8× return on ad spend just to break even — so a campaign running at 2× is not "slightly underperforming", it is losing money on every sale it brings in.
Worked example
A $40 product with $5 shipping charged brings in $45. Landed cost $14, the label costs $9, the processor takes $1.61 — $20.39 gross, a 45% margin, which sounds like a healthy store. Then $2.50 of packaging, $1.60 of spread return cost and $20 of blended acquisition cost leave −$3.71. A hundred of those a month is $4,500 of revenue and $371 of loss, before rent, software or your own time.
Nothing in that example is unusual. The order didn't fail because of one bad decision — it failed by $4 across four small ones, which is exactly the kind of failure a revenue dashboard cannot show you.
What to do with a negative number
- Raise the price before cutting anything. A $4 increase here turns the order profitable without touching a single cost.
- Close the shipping gap. Charging $5 for a $9 label is a $4 subsidy on every order, and usually the fastest fix on the page.
- Check your discount codes. A 20% code survives on a 45% gross margin; on a 30% product it doesn't. Run the calculator again with the discounted price.
- Treat acquisition cost as a budget, not a result. You now know your ceiling — tell the ad platform about it.
From estimate to measurement
A calculator uses one set of numbers you typed. Your real costs move: suppliers reprice, carriers change zones, the return rate differs by product, and the ad spend that matters is yesterday's, not last quarter's. That's the difference between knowing your margin on a model order and knowing which of your products actually made money last month.
ProfitVault does this join automatically on your real orders — product cost, shipping, payment fees, refunds and expenses, per order and per product. See alsohow to calculate profit margin,what COGS really includes,net vs gross profit, and thebreak-even point calculator for the monthly, fixed-cost side of the same question.