"Is my margin healthy?" is the question every store owner should ask before scaling ad spend. Here's how to calculate your real Shopify profit margin, what counts as good by product type, and the four levers that actually move it.
Two numbers, often confused:
Most "I have a 60% margin" claims are gross margin. After processing fees and especially ad spend, net margin is usually far lower — and net is the number that pays you.
| Net margin | Reality |
|---|---|
| Under 10% | Fragile — one bad ad month or fee change wipes profit. |
| 10–20% | Typical for healthy DTC / ecommerce stores. |
| 20–30% | Strong — usually means low CAC or premium pricing. |
| 30%+ | Excellent — common for digital products or strong brands. |
By model: dropshipping often runs 10–20% net (thin product margins, high ad reliance); print-on-demand 15–25%; handmade/branded 20–40%; digital products 70%+ because there's no COGS or shipping.
For a single order, subtract everything from revenue:
What's left ÷ revenue = your net margin. The ad spend line is where most stores discover they're barely profitable — a 50% gross margin product can hit 5% net once CAC is real.
Our free tool does all six steps above — including processing, plan and ads — instantly.
Free Profit Calculator Full Spreadsheet — $9A 10% price increase usually drops far fewer than 10% of buyers, so it lifts net margin more than any cost cut. Test it before you assume customers will leave.
Negotiate supplier pricing at volume, or switch POD providers. Even $1 off a product cost on 500 orders is $500/month straight to the bottom line.
For most stores this is the biggest lever and the hardest. Improving conversion rate lowers effective CAC without touching ad spend — better product pages, faster load, clearer offers.
Bundles, upsells, and free-shipping thresholds raise revenue per order, which dilutes your fixed costs (the $0.30 processing fixed and your plan) across a bigger basket.
The $9 spreadsheet works backward from your target margin to the exact price to charge — plus a break-even tab and discount-impact math in the $14 bundle.
Get the Spreadsheet — $9 Calculator + Pricing Worksheet — $14A net margin of 10–20% is typical and healthy for physical-product stores; 20–30%+ is strong. Digital products can exceed 70% because they have no COGS or shipping. Under 10% net is fragile.
Subtract all costs — product, shipping you pay, payment processing, your plan and apps per order, and ad spend — from revenue, then divide by revenue. The free calculator on this site does it instantly.
Almost always ad spend (CAC) and a low conversion rate. A product with a 50% gross margin can net under 10% once you account for the cost of acquiring each customer.
Shopify-side costs (plan + processing + apps) are usually 4–7% of revenue. They matter, but they're rarely the reason a store is unprofitable — COGS and ad spend almost always dominate.