What the Ecommerce Profit Calculator does
This calculator works out what one online order really leaves you after product cost, shipping, payment and platform fees, returns and advertising - and from that, the break-even ROAS and the most you can pay to acquire an order. It shows the whole per-order waterfall rather than a single margin, so you can see which line is eating the profit.
Everything is plain arithmetic in your browser. The formulas and the rounding rule are printed below the tool, so you can check any figure by hand or rebuild it in a spreadsheet.
How to use it
- Enter the selling price, any average discount and what you charge for shipping. Say whether your prices include tax (VAT or GST, usual in the UK, EU, India and Australia) or whether sales tax is added at checkout (usual in the US).
- Enter the variable costs of one order: product cost, what the carrier charges you, packaging, the payment processor's percentage and fixed fee, and any marketplace or platform commission.
- Add your return rate, the cost of handling a return and how much of the product cost you recover by restocking. Then enter the ad spend per order (your blended CPA) and the margin you want to keep.
- Read the break-even ROAS and CPA, the profit per order after ads, and the waterfall. Open the monthly view to add order volume and fixed costs.
- Save the current inputs as a scenario, change something - price, return rate, CPA - and save again. The comparison table puts up to six scenarios side by side.
Reading the results
Contribution before ads is what each order pays towards advertising, fixed costs and profit. If it is zero or negative, no advertising efficiency will save the product: the price or the costs have to change.
Break-even ROAS is the return on ad spend at which ads consume the whole contribution. Below it you lose money on every advertised sale; above it you make some. It is calculated on net revenue (after tax and expected refunds), because that is the money you keep. Ad platforms usually report gross conversion value, often including tax and before returns, so the tool also shows the break-even figure on that basis - compare like with like.
Break-even CPA is the same threshold expressed as a cost per order. The target CPA is lower: it leaves the margin you asked for after ads.
Return costs are expected values. A 25% return rate does not mean a quarter of your orders cost you nothing; it means each order carries a quarter of the cost of a refund, a handling fee and any stock you cannot resell.
Worked example: a $60 product with 10% returns
A US store sells a product for $60 with free shipping; sales tax is added at checkout and passed through. Product cost is $18, shipping costs the store $7, packaging $1, and the processor charges 2.9% + $0.30. One order in ten comes back; each return costs $5 to handle and the item goes back into stock.
Refunds take 10% of $60, so expected net revenue is $54.00. Product cost falls to $16.20 because a tenth of it is recovered. Payment fees are $1.74 + $0.30 = $2.04, charged on every order and not refunded, and return handling averages $0.50. Variable cost is $16.20 + $7 + $1 + $2.04 + $0.50 = $26.74, leaving $27.26 of contribution: a 50.5% contribution margin.
Break-even ROAS is $54.00 / $27.26 = 1.98. Measured against the $60 an ad platform would report, it is 2.20. At a $15 cost per order, each order makes $12.26, a 22.7% margin after ads.
Formulas and scoring rules
- Gross (customer pays)
gross = price x (1 - discount%) + shipping chargedSales tax added on top is shown separately and passed through.- Net revenue
net = gross / (1 + tax%) when prices include tax, otherwise gross- Expected net revenue
expected net = net x (1 - return rate)- Variable cost per order
COGS x (1 - return rate x recovered%) + shipping + packaging + (payment% + marketplace%) x gross + payment fixed + other + return rate x handling costPayment and marketplace fees are charged on gross and are assumed not to be refunded.- Contribution and margin
contribution = expected net - variable cost; contribution margin = contribution / expected net- Break-even ROAS
break-even ROAS = 1 / contribution margin = expected net / contributionOn platform-reported revenue: gross / contribution.- Break-even and target CPA
break-even CPA = contribution; target CPA = contribution - target margin x expected net; target ROAS = expected net / target CPA- Monthly view
monthly profit = (contribution - ad spend per order) x orders - fixed costs; break-even orders = ceiling(fixed costs / (contribution - ad spend per order))Nothing is rounded until display. Money shows 2 decimals and ratios 2 decimals, rounded half away from zero.
Why break-even ROAS is not the target
A campaign running exactly at break-even ROAS pays for its own orders and nothing else: no contribution to rent, salaries or profit. That is sometimes worth it - a first order from a customer who will buy again, or clearing stock - but it should be a decision, not an accident. Use the target margin field to get the ROAS or CPA that leaves the margin you actually need.
The reverse also holds. A ROAS that looks healthy in an ad dashboard can still lose money if it is measured on gross revenue including tax and before returns, for a product with thin margins. A 3.0 platform ROAS on a product whose break-even on gross is 3.3 is a loss on every sale.
Contribution margin versus gross margin
Gross margin usually subtracts only the product cost. Contribution margin subtracts every cost that rises with each order: shipping, packaging, payment and platform fees and the expected cost of returns. For online retail those costs are often as large as the product itself, which is why a 60% gross margin can become a 30% contribution margin, and why ROAS targets must be set from the second figure.
Limitations: what the result does not prove
- The results are only as good as the costs you enter. Blended averages hide products and channels that lose money; model them separately when they differ.
- Returns are treated as full refunds of the order's net revenue. Partial refunds, exchanges, restocking fees and chargebacks need adjusting by hand.
- It is a per-order model. It does not know about customer lifetime value, repeat purchases, stock financing, seasonality or the extra orders an ad would not have caused (incrementality).
- Tax treatment is simplified to one rate. It is not tax advice; marketplace-facilitator rules, VAT schemes and thresholds vary by country.
Privacy: where your data goes
Everything you paste, type or drop is processed in this browser tab. It is not uploaded, logged, stored or sent to analytics. Session recording and tag-manager scripts are switched off on this page.
Standards and sources
- Google Ads Help - About ROAS (target return on ad spend) bidding
- HMRC - VAT: how to work out VAT-exclusive prices (VAT guide)
Frequently asked questions
How do I calculate break-even ROAS for my store?
Divide one by your contribution margin before ad spend. If each order leaves 40% of net revenue after product, shipping, fees and returns, break-even ROAS is 1 / 0.40 = 2.5: every unit of ad spend must bring back 2.5 units of net revenue to break even.
Should ROAS be calculated on revenue with or without tax?
The money you keep excludes tax, so this tool's main figure uses net revenue. Many ad platforms report conversion value including tax and before returns; the second figure shows break-even on that gross basis so you can compare it directly with the dashboard.
What is the difference between break-even CPA and target CPA?
Break-even CPA is the ad cost per order that leaves exactly zero profit. Target CPA is lower: it keeps the margin you set in the target field. Bidding to break-even CPA only makes sense when later repeat orders will pay you back.
How do returns change my profit per order?
Each order carries the return rate times the refund, plus handling and any stock you cannot resell. Fees and outbound shipping are usually not given back. A 20% return rate on a product with thin margins can remove most of the contribution, which is why the tool shows returns as their own line.
Why is my contribution margin lower than my product margin?
Product margin only takes off the product cost. Contribution margin also takes off shipping, packaging, payment and marketplace fees and returns - every cost that grows with each order. Those are exactly the costs your advertising has to cover, so they belong in the ROAS calculation.
How many orders a month do I need to break even?
Open the monthly view and enter your fixed costs. The tool divides them by the profit per order after ads and rounds up. If profit per order after ads is zero or negative, no volume breaks even and the tool says so.
Can I compare a price rise with cutting ad spend?
Yes. Save the current inputs as a scenario, change the price and save again, then change the CPA and save a third time. The comparison table shows net revenue, contribution, break-even ROAS and monthly profit for each one side by side.
Last reviewed by the A2Z.Tools team against the sources listed above.
