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Revenue is growing. Is your profit growing too?
Rising revenue does not automatically mean a healthier business. So don't just look at revenue and ROAS, the return on your ad spend. Check these 6 things as well.
Worked example
An order of €60 excluding VAT. Product cost €21, shipping €6, payment fees €1.50, discount €6 and ads €18. Your ROAS is 3.3. You keep €7.50, and your fixed costs still have to come out of that.
- Contribution marginWhat is left after product, shipping and ads. Calculate it per month. Revenue growing but this amount shrinking? Then you are buying your growth.
- Cost per new customerWhat you pay to win 1 new customer. Divide your ad spend by the number of new customers.
- ReturnsHow much revenue comes back. Look per product, not just at the total.
- Shipping costsWhat you pay for delivery yourself, including when the customer gets free shipping.
- DiscountsHow much margin you give away in promotions. Include discount codes from influencers and affiliates.
- Profit per productWhich products actually earn money, after product cost, shipping, returns and discount.
Question for your team
Can we explain within 5 minutes today which products and channels actually add profit?