Ads Budget
The total amount of money allocated to be spent on advertising for a specific period, typically a month.
E-commerce Profit Calculator
Calculate your e-commerce ad campaign profitability. Model your budget, CPC, conversion rate, and COGS to find your true net profit and ROI.
Scenario A
Ad Campaign Inputs
Product & Cost Inputs
How to Calculate E-commerce Profitability
This calculator is designed specifically for e-commerce businesses running paid ad campaigns. It moves beyond simple ROAS to give you a clear picture of your true net profit by factoring in not just ad spend, but also the cost of the goods you sell (COGS) and other fixed business costs.
Step 1: Campaign & Conversion Metrics
Start with your top-of-funnel numbers. Enter your monthly **Ad Budget**, your average **Cost Per Click (CPC)**, and your website's **Conversion Rate**. These inputs determine how many sales your ad spend will generate.
Number of Conversions = (Ad Budget / CPC) × Conversion Rate %
Step 2: Product Revenue & Costs
Next, enter your unit economics. Provide the **Average Product Revenue** per sale and the **Average Product Cost (COGS)**. This allows the calculator to determine your gross profit per sale.
Gross Profit = (Conversions × Avg. Revenue) - (Conversions × COGS)
Step 3: Calculate True Profit & ROI
Finally, add any other **Fixed Costs** (like software, hosting, etc.) to get your true **Net Profit**. The calculator also computes your overall **Return on Investment (ROI)**, which compares your net profit to your total costs (ads + COGS + fixed costs).
FAQs
COGS represents the direct costs of producing the goods sold by a company. This includes the cost of materials and direct labor used to create the good. It does not include indirect expenses, such as distribution costs and sales force costs.
ROAS (Return on Ad Spend) only measures revenue against ad spend, while ROI (Return on Investment) measures net profit against ALL costs. An e-commerce campaign can have a high ROAS (e.g., 400%) but a negative ROI if the cost of goods sold (COGS) is too high. ROI is the true measure of profitability.
A good ROI varies widely, but a common target is **100% or more**, which means you are doubling your total investment. Unlike ROAS, where 400% is a common benchmark, a positive ROI of any amount means your business is profitable after accounting for all expenses.
Key Terms for this Calculator
Cost Per Click (CPC)
The average price you pay each time someone clicks on your ad.
Conversion Rate
The percentage of ad clicks that result in a sale on your e-commerce store.
Average Product Revenue
The average price a customer pays for a product in a single transaction (also known as Average Order Value or AOV).
Cost of Goods Sold (COGS)
The direct costs attributable to the production of the goods sold, including materials and manufacturing costs.
Fixed Costs
Business expenses that are not directly tied to the number of sales, such as hosting fees, software subscriptions, or rent.
Net Profit
The final profit after all costs—including ad spend, COGS, and fixed costs—have been subtracted from the total revenue.
Return on Investment (ROI)
A percentage that measures the net profit relative to the total investment (all costs combined). It is the ultimate measure of a business's financial performance.