Shopify profit margin formula for ecommerce ads.
Shopify revenue is not the same as profit. To set useful ad targets, you need net revenue, variable costs, and contribution margin.
Core formula
variableCosts = productCost + shippingCost + packagingCost + fees + estimatedRefundImpact
contributionMargin = netRevenue - variableCosts
Contribution margin is the amount available for ads, overhead, and profit. If it is narrow, even a strong-looking ROAS can be risky.
What to include
Discount amount
Selling price x discount percent
Net revenue
Selling price - discount amount
Variable costs
COGS + shipping + packaging + payment fees + estimated refund impact
Contribution margin
Net revenue - variable costs
Break-even CPA
Contribution margin, when contribution margin is positive
Why this matters for ROAS
ROAS only compares revenue to ad spend. Profit margin shows whether enough of that revenue survives after costs. The lower your contribution margin, the higher your break-even ROAS usually becomes.
Turn margin into ad guardrails
Use SellMira to calculate break-even ROAS, break-even CPA, target ROAS, and profit after ads from the same margin assumptions.