Ecommerce Profit Formulas: How ROAS, CPA, POAS, MER, and Payback Connect

Use one currency and one net-revenue basis per order. Let R be net revenue excluding tax, V be variable costs excluding ads, C be contribution before ads, and P be the contribution you want to retain after ads.

Contribution before ads (C) = net revenue (R) - variable costs excluding ads (V)

Contribution margin % = C / R x 100

Break-even ROAS = R / C

Allowable CPA = target CPA = C - retained contribution target (P)

Target ROAS = R / allowable CPA

Break-even ROAS spends all contribution on acquisition. Target ROAS is higher because it reserves P first. These formulas only convert directly when ROAS revenue and CPA conversions use the same order population, attribution window, and revenue basis.

Once spend is observed, actual CPA replaces the allowable ceiling. For this guide, POAS means contribution after ad spend divided by ad spend. Some platforms and analysts use a different profit boundary, so always state the numerator before comparing POAS values.

Contribution after ads per order = C - actual CPA

POAS = contribution after ads / actual CPA

Assume $100 net revenue per order, excluding tax. Product cost is $40, fulfillment is $8, other variable cost is $4, payment fees are 3% of revenue, and expected return loss is 5%.

If actual CPA is $25, actual ROAS is 4.00x, contribution after ads is $15 per order, and POAS under this guide's definition is $15 / $25 = 0.60x.

Scale the example to 1,000 same-basis orders: $100,000 net store revenue, $60,000 variable costs excluding ads, and $25,000 total marketing spend. Store contribution after marketing is $15,000 and MER is 4.00x.

MER = total store net revenue / all marketing spend = $100,000 / $25,000 = 4.00x

If one or more ad platforms claim $110,000 of attributed revenue on that spend, their combined reported ROAS is 4.40x. It does not create another $10,000 of store revenue. Attribution can overlap and use different windows; MER remains based on the store total, while contribution after marketing still requires the cost model.

Suppose the same $25,000 marketing spend is allocated to 600 new customers. New-customer CAC is $41.67, not the $25 average cost per order. A mature cohort records $30 cumulative contribution per customer by day 30, $38 by day 60, and $48 by day 90. CAC is first covered at day 90.

CAC = new-customer acquisition spend / new customers = $25,000 / 600 = $41.67

CAC payback = first mature checkpoint where cumulative cohort contribution is at least $41.67

If cumulative contribution reaches $72 by day 365 and the business requires $15 retained contribution by then, allowable 365-day CAC is $57. That is not interchangeable with the $30 order-level target CPA: one uses customer-cohort value over 365 days, while the other uses a single order conversion.

Do not force a conversion: CPA can equal CAC only when the conversion is a new customer, spend is allocated to those customers, and both metrics use the same scope. MER cannot reveal payback timing, and a profitable cohort cannot prove that a channel's attributed revenue was incremental.

1. Revenue: Use net revenue after discounts and mature refunds, normally excluding tax, across every numerator.
2. Costs: Include product, fulfillment, payment, marketplace, return, and other variable costs once. Keep fixed overhead separate unless deliberately allocated.
3. Conversion: Label whether CPA means order, lead, subscription, or new customer.
4. Profit: Define whether POAS uses gross profit, contribution before ads, or contribution after ads. This page uses contribution after ads.
5. Attribution: Do not add platform claims or substitute them for store revenue.
6. Cohort: Use cumulative contribution from observable checkpoints, not revenue LTV or an unobserved lifetime forecast.

Model limit: The equations describe economics under the entered assumptions. They do not estimate incrementality, forecast platform delivery at a target, include cash timing or fixed overhead by default, or establish an industry benchmark.

Shopify documents sales, product-cost, marketing, and customer report fields. Amazon Ads documents ROAS as attributed sales divided by ad spend. The contribution, POAS, allowable CPA, and payback relationships on this page are ROAS Break modeling choices; they are not platform promises or universal accounting definitions.

• Shopify sales reportsGross sales, discounts, returns, net sales, and total sales. Checked August 20, 2026.
• Shopify profit reportsProduct cost, gross margin, and profit reporting. Checked August 20, 2026.
• Amazon Ads ROAS guideROAS definition and interpretation. Checked August 20, 2026.
• Shopify marketing reportsMarketing attribution, sales, and ROAS reporting context. Checked August 20, 2026.
• Shopify customer reportsNew and returning customer reporting context. Checked August 20, 2026.