30 minutes that tell you whether your business makes money or just moves money.

TThe margin article explained why net margin matters more than the ROAS on your dashboard. This one shows you exactly how to calculate it, on your real products. Not estimates, not round numbers. Invoices, receipts, courier contracts.

You do this once, do it well, and use that number for a full year. Every scaling decision, every agency negotiation, every price adjustment starts from this number. Worth doing right.

Thirty minutes if the data is nearby. An hour if you have to dig through emails to find the courier contract. Worth it either way. You walk out with a number you can defend anywhere. In front of any agency, in front of the accountant, and in front of yourself at 3 AM wondering if the business makes sense.

Step 1. Five products, picked with intent

You are not doing the whole catalog today. You pick five that tell the full story. Three of your best sellers from the last 90 days. One you instinctively think has strong margin. Usually an accessory or a premium SKU. And one that sells modestly but stays in the catalog because it pairs with the rest.

Why not the whole catalog? Because most of the profit usually comes from a small share of products. Pareto shows up in nearly every store. If you calculate margin on 5 representative products, you already have most of the picture. You fill in the rest when you have time, not now. Right now you need to know if your business makes money or just moves money.

Step 2. The eight-column table

Open Google Sheets or Excel. Eight columns in the header. One product per row. Do not complicate. Eight columns show the truth. More than that buries it.

One important detail. This list does not include rent, does not include your salary, does not include the Shopify subscription. Those are fixed costs. You pay them whether you sell zero products or a thousand. Net margin per product shows you what is left after costs that vary directly with each sale. Fixed costs get subtracted later, when you calculate company break-even. But product margin is the first step and the most important one.

Step 3. The formula, in one column

Column 9: Net margin. Formula: sale price minus the sum of columns 3 through 8, divided by sale price, multiplied by 100. In Excel: =(B2-SUM(C2:H2))/B2*100. Drag it down across all five products.

The first numbers that come out are almost always lower than you assumed. That is normal. Most founders carry a mental mark-up from the supplier and confuse it with margin. A 50% mark-up means you buy at 50 and sell at 100. Sounds good. But net margin, after subtracting courier, packaging, returns, and payment fees, lands at 28-32%. That is the distance between dreaming and knowing.

Picture a founder certain he has 48% margin. You plug the real numbers in and it comes out at 29%. The 19-point gap comes from three places: the real courier cost he underestimated, the returns he did not count at all, and the payment processing fee he considered negligible. 19 points. That is the difference between an informed scaling decision and one that puts you in the red.

Example across five categories

The table below shows typical values per category, rounded for clarity. Do not take them as your exact numbers. They are reference points so you see how margin differs from one category to another. Your numbers come out of the table above.

Notice the pattern. Fashion and small accessories sit in the 55-60% range. They scale easily on ads because they absorb acquisition costs without crushing profit. Electronics and supplements sit at 36%. They can work, but they need solid volume and AOV boosted through bundles. The scooter at 43% sits in between. It works, but only if average order value is high. Under EUR 300 AOV, the same business becomes risky.

These numbers tell you something essential: not all products scale the same way. A commission-based agency will politely decline products with margin under 20%. A retainer agency will promote all of them and ask for more budget when they do not perform. The difference is that the first one loses money if it does not make you sell. The second one bills you regardless.

Step 4. Weighted average, the real company margin

This is where half of all founders lose the good number. Business margin is not the arithmetic average of product margins. Sell 100 dresses at 57% and 10 headphones at 36%, your average is not 46.5%. Your volume-weighted margin is 55.1%. But flip the volumes, sell 10 dresses and 100 headphones, your real margin drops to 37.9%. Same products. Same per-product margins. Two completely different businesses.

In Excel, column 10 is Sales: units sold per product over the last month. Column 11: Margin times Sales. At the bottom, divide the sum of column 11 by the sum of column 10. That is the number. Weighted net margin. That is what you work with. That is what you discuss with any agency. That is what tells you whether scaling makes sense.

Say a founder believes he has 45% margin because that is his arithmetic average. The weighted margin is actually 31%. The 14-point gap comes from the fact that most of his sales volume is on the low-margin products, not the high-margin ones. After paying the agency's 10% commission and the ad budget, he is left with a few percent net profit. And often he does not even know, until he runs the math.

Step 5. What to do with the number

You have your weighted margin. Look at it and place yourself in one of three tiers.

1. 01Over 30%. You can safely work with a commission agency at 5-10%. There is room left after commission, after ads, after operational costs. Scaling is relatively safe if the other factors are in order: clean tracking, enough stock, fast fulfillment.
2. 02Between 20% and 30%. Scale carefully on 5-10% commission. You do not run ads on the whole catalog. You promote only products with individual margin above 30%. The rest stays on organic and email. That keeps your weighted margin in the healthy zone.
3. 03Under 20%. You do not start aggressive scaling, no matter what any agency promises. You either raise price, renegotiate supplier costs, or rethink which products you promote. At under 20% margin, every euro into ads is a euro you will very likely lose.

These thresholds are not carved in stone. A product with 18% margin can work if LTV is high and the customer buys 4 times a year. A product with 35% margin can fail if returns run at 20%. But as a compass, these thresholds work in most accounts.

Four mistakes that lie about your margin by 10 points

• You forget VAT. If you are VAT registered and you take the site price as displayed, the margin is fiction. Strip VAT (divide by 1.19 in Romania) before any calculation. There are businesses convinced they have 35% margin that are actually running at 18%. That gap is the gap between profit and slow bankruptcy.
• You do not include your own salary in fixed costs at break-even. Not a product margin issue, agreed. But it defines total revenue you need to come out ahead. If you work 50 hours a week and do not price your time, you are an employee at your own company, not an owner. Break-even includes a market salary for what you do.
• You ignore returns. A 5% return rate is not minus 5% of sales. It is the product that often comes back with torn packaging, signs of wear, or missing pieces. 80-100% loss per unit, plus courier both ways. Put 5-7% cost on returns in column 6, not 2%. A fashion store with 12% actual returns calculating with 3% has a real margin about 9 points lower than it believes.
• You calculate margin at full price when 40% of sales happen during 20% or 30% discount promotions. The correct number is margin at the real average sale price, not the listed price. Pull AOV from Shopify or WooCommerce over the last 90 days and start there. If a business calculates margin at EUR 120 full price, but real AOV is EUR 84 because of constant promotions, real margin is about 18 points lower.

Do not stop at one calculation

Margin shifts. Supplier prices shift. Courier costs shift. Return rates shift. The promotions you run change your AOV. Redo the exercise every 3 months. It is 30 minutes that can save you tens of thousands of euros in wrong decisions.

Think about what happens when a supplier raises prices by 8%. The weighted margin can drop from 34% to 27%. At 34%, the agency's 10% commission plus the ad budget left decent profit. At 27%, the same setup puts you at zero. You renegotiate with the supplier, raise prices on two categories, and you can be back at 32%. If you do not recalculate, you keep believing you are profitable when you are actually at break-even.

And if you want to talk to us, the first thing we ask is weighted margin. Not because we are curious. Because without it we cannot tell you whether it makes sense to work together. A real number, calculated on invoices, not on estimates. That is the starting point.