Revenue is not profit. Here is the full per-order formula, a worked example, break-even ROAS and the costs most new sellers forget.
“I made $3,000 in sales this month” means nothing until you subtract everything it cost to get those sales. Here is the full per-order profit formula, a worked example, the break-even point for your ads, and the costs new sellers usually forget.
Real profit per order = selling price − product cost − shipping − platform and payment fees − VAT or GST included in the price − ad cost per order − an allowance for returns. Work out your break-even cost per order first: if ads cost more than that per sale, you lose money however many orders you get.
Three numbers get mixed up all the time:
Only net profit pays you. A store can have healthy gross profit and still lose money every month because advertising and refunds take the rest.
Work it out for a single order first. It makes every decision easier.
Profit per order = Selling price − Product cost − Shipping − Platform and payment fees − Advertising cost per order − Returns allowance
Each part, in plain words:
Here is an example for a small gadget sold on a Shopify store in the United States. The numbers are illustrative — use your own supplier quotes and ad results.
| Line | Amount |
|---|---|
| Selling price | $29.99 |
| Product cost | −$7.50 |
| Shipping to customer | −$4.50 |
| Payment processing (2.9% + 30¢) | −$1.17 |
| Advertising cost per order | −$10.00 |
| Profit per order | $6.82 |
That is about a 23% net margin before returns. If 5% of orders get refunded, set aside roughly $1.50 per order and the real profit falls to around $5.30. Still positive — but notice how the advertising line is bigger than the product and shipping together. That is normal for paid-ads stores, and it is why cheap products with small price tags are so hard to make work.
Two numbers tell you whether your ads are working.
This is the most you can pay for one order before you lose money. Take the formula above, leave out advertising, and see what is left:
$29.99 − $7.50 − $4.50 − $1.17 = $16.82
If your ads bring orders for less than $16.82 each, you make money. Above that, you lose money on every sale.
ROAS is “return on ad spend”: revenue divided by ad spend. Ad platforms show it on your dashboard, so it is handy to know your break-even figure:
Break-even ROAS = Selling price ÷ Break-even CPA = $29.99 ÷ $16.82 ≈ 1.78
If your ads report a ROAS above 1.78, you are profitable on this product. Below it, you are paying to lose money. Most sellers aim well above break-even to leave room for returns and slow days.
For a step-by-step way to use this number when you test ads, see testing a new product with Facebook and Instagram ads.
You will often hear that the selling price should be at least three times the landed cost (product plus shipping). Here is why. In the example, landed cost is $12.00 and the price is $29.99 — about 2.5×. After fees, you have $16.82 to spend on ads and keep as profit. At 2× the landed cost, ($24.00) that space shrinks to about $11, and one bad week of ads wipes you out. At 3× or more, you can survive testing, rising ad costs and the occasional refund.
The rule is a starting point, not a law. On marketplaces with free traffic you may not need paid ads at all, so a lower multiple can work. On paid-ads stores, a higher one is safer.
The US example is simple because American prices are shown before sales tax. In most of our other markets, the price the customer sees already includes VAT or GST. If you are registered for VAT there, part of every sale belongs to the tax office. New sellers often put the full sticker price into their profit sum and wonder where the money went.
To find your real revenue, divide the customer price by (1 + the tax rate):
| Market | Standard rate | Customer pays | Your revenue after tax | Tax portion |
|---|---|---|---|---|
| United Kingdom | 20% VAT | £24.99 | £20.83 | £4.16 |
| Germany | 19% VAT | €24.99 | €21.00 | €3.99 |
| Australia | 10% GST | A$39.95 | A$36.32 | A$3.63 |
| UAE | 5% VAT | AED 99 | AED 94.29 | AED 4.71 |
| Saudi Arabia | 15% VAT | SAR 99 | SAR 86.09 | SAR 12.91 |
Look at Saudi Arabia: almost 13 riyals of a 99-riyal sale is tax. On a product where you expected 30 riyals of profit, that is close to half of it. France (20%), Austria (20%), Spain (21%) and Italy (22%) work the same way as the UK and Germany, with slightly different numbers.
A few other rules that change the maths:
Tax rules are not something to guess. Confirm your own obligations with an accountant in the country you sell to.
Fees change, so always confirm on the platform’s own pricing page. As a rough guide:
| Platform | Main fees |
|---|---|
| Shopify | Monthly plan plus payment processing (around 2.9% + 30¢ per order on a basic US plan with Shopify Payments); extra transaction fee if you use another payment provider |
| Amazon | Referral fee per sale (about 15% in many categories), plus a monthly seller plan and fulfilment fees if you use FBA |
| eBay | Final value fee on the total sale (often around 13–15% depending on category) plus a small per-order fee |
| TikTok Shop | Referral commission per sale that varies by country and category, plus any affiliate commission you offer creators |
Our platform comparison explains how these fees trade off against free traffic.
A card payment costs a small percentage. A cash-on-delivery order costs nothing to “process” but can cost you two delivery fees if it is refused. Here is how it usually looks across our markets:
| Market | How people usually pay | What it does to your margin |
|---|---|---|
| US, Canada, Australia | Cards, PayPal, Apple Pay; Afterpay and Klarna for buy now, pay later | Percentage fees per order; buy-now-pay-later usually costs you more per order than a card, and chargebacks carry an extra fee |
| UK and EU (Germany, France, Italy, Spain, Austria) | Cards, PayPal, Apple Pay; Klarna and Clearpay are popular | Similar to the US, plus the 14-day right to cancel online orders, so plan for more returns |
| India | UPI, cards and a large share of cash on delivery | Prepaid UPI orders are cheap to process; COD orders carry refusal risk |
| Pakistan | Mostly cash on delivery | No card fees, but refused parcels and courier charges become your biggest hidden cost |
| UAE and Saudi Arabia | Cash on delivery, cards, and Tabby or Tamara for instalments | COD refusals on one side; instalment provider fees on the other |
Provider fees change, so check current pricing. For COD markets, the right cost line is a delivered rate, not a payment fee. Our guide to reducing COD returns shows how to put a rupee value on refusals.
You sell at AED 99, VAT included, so your revenue is AED 94.29. The supplier charges AED 30 and delivery costs AED 20, leaving about AED 44 per delivered order before ads. A refused order earns nothing and still costs the delivery charge, plus any return fee. Run your break-even on delivered orders, not orders placed.
Every product in our product finder includes a profit calculator where you can enter your own ad cost per order and see the result instantly.
Many sellers aim for 15–30% net profit per order after ads. Lower can work at high volume; higher is common on marketplaces with free traffic. What matters is that the number stays positive after returns.
When comparing products, no — keep the per-order maths clean. When judging whether the business is worth it, yes.
Your break-even ROAS may be higher than 2, or costs outside the ad dashboard — returns, apps, refused orders — are eating the profit. Work out your own break-even with the formula above.
Often, yes, but build the shipping cost into the price. “Free” shipping you do not price in comes straight out of your profit.
If you are registered for VAT and your prices include it, take it out first. Divide the price by 1.20 in the UK, 1.19 in Germany, 1.05 in the UAE or 1.15 in Saudi Arabia, and use that figure as your revenue.
In the UK, EU, Australia, the UAE and Saudi Arabia, consumers generally expect, and in many cases are legally owed, a price that includes tax. In the US and Canada, prices are normally shown before tax, which is added at checkout. Check the rules for each market you sell to.
There is no single answer. Higher prices in the US, UK and Australia often come with higher ad costs and more returns. Gulf COD markets have lower ad costs for many products but carry refusal risk. Run the formula for each country separately — the same product can win in one and lose in another.
A numbers-first way to test products with Meta ads for COD stores: break-even cost per order, test budgets, kill-and-keep rules and how to scale safely.
The shots, hooks, light and sound that make phone-filmed product videos work on TikTok, Reels, Facebook and Snapchat — and the mistakes that make ads expensive.
What one refused parcel really costs, why moving from 60% to 80% delivered can nearly triple profit, and nine fixes in the order they pay off.
