What is profit after order costs?
Profit after order costs is the second layer of profit. The first layer is profit after cost of goods: revenue minus what the product cost you. Then come the costs each order brings: shipping, the payment provider, a marketplace's commission and whatever comes back.
In accounting this is often called contribution margin: what each order contributes to your fixed costs and marketing.
How do you calculate it?
Take the revenue of an order excluding VAT and subtract: cost of goods, shipping, payment fees, commission and the cost of returns and refunds.
Example: an order of €100 with €40 cost of goods, €15 in shipping, payment fees and commission, and €5 in returns on average, leaves €40. That is 40%.
You need that 40% for your break-even ROAS: 1 ÷ 0.40 = 2.5.
What to watch out for
Returns and refunds are often forgotten, because they come later and sit somewhere else. An order that looks profitable today can be a loss three weeks from now.
Also calculate per channel. A sale through a marketplace has different costs than a sale in your own shop, even for the same product.
In Ecommy
Ecommy calculates profit after order costs for every order, with costs from your shop, marketplaces, logistics and payment providers, on your definitions. That way you see it per product, channel and campaign.