How to calculate Shopify profit, step by step
Shopify shows you sales. It doesn't show you what you keep. To get from one to the other, take every cost off in the order money leaves the business. This is exactly what the calculator does, using the example store it opens with: 62,500 sessions a month, a 1.6% conversion rate and a $100 average order.
| Line | Formula | Example store |
|---|---|---|
| Gross sales | sessions × conversion rate × average order value | 62,500 × 1.6% × $100 = $100,000 |
| Net revenue | gross sales − discounts − refunds | $100,000 − $12,000 − $12,320 = $75,680 |
| CM1, gross profit | net revenue − product cost | $75,680 − $28,758 = $46,922 |
| CM2 | CM1 − shipping − payment fees | $46,922 − $10,000 − $2,852 = $34,070 |
| CM3 | CM2 − ad spend | $34,070 − $27,000 = $7,070 |
| EBITDA | CM3 − team, agencies, apps, overhead | $7,070 − $17,000 = −$9,930 |
| Net profit | EBITDA − corporate tax (only on a profit) | −$9,930 |
A store that sells $100,000 a month and loses almost $10,000. Nothing looks broken in Shopify's dashboard: the sales are there, the ads report a decent ROAS. The loss only shows up when every line sits in one table.
What is a good profit margin for a Shopify store?
Look at two margins, not one:
- CM3, what is left after product, shipping, fees and ads. 20–25% of net revenue is healthy for a direct-to-consumer brand, and 35%+ is great. Under 10%, the ads are buying revenue, not profit. The example store sits at 9%.
- Net profit, after the team and overhead. Usually 5–15% for a growing brand. It depends on how much you reinvest, so judge it next to CM3, not alone.
The fastest way to see which margin is the problem is the P&L above: the first line where the number turns small is where your money goes.
Break-even ROAS and MER: when ads lose money
Break-even MER (marketing efficiency ratio) is net revenue ÷ CM2: how many dollars of revenue each ad dollar has to bring back before you make anything. In the example store it's 2.22×. Its real MER is 2.80×, so the ads are above break-even, but the margin they leave doesn't cover the team and overhead.
Use blended MER (all revenue ÷ all ad spend) rather than the ROAS inside Meta or Google. The platforms count the same order more than once and claim sales that would have happened anyway.
Only want to know what conversion rate you need to break even? The break-even conversion rate calculator asks for six numbers instead of eighteen.
Why conversion rate and order value usually win
Run the levers chart on almost any store and conversion rate or average order value comes out on top. They raise revenue without raising ad spend, so most of the extra revenue drops to profit. In the turnaround example, a conversion rate going from 1.6% to 1.9% and an order going from $100 to $108 do more than cutting ads, discounts and returns together.
But test before you implement. Something that works for other stores might not work for yours: I've seen a single five-star review under the Add to Cart button add 8% revenue per visitor on one store and cut orders on another. An A/B test tells you which one you are before you roll a change out to all your traffic.
Want to see how stores find those wins? Read 100 ways to improve conversion rate on Shopify or see what a Shopify CRO audit covers.