Revenue & Product Cost
Enter your product's selling price and what you pay your supplier.
Platform & Payment Fees
Select your platform or enter custom rates.
Ad Spend
Enter your advertising cost per order — or calculate from ROAS.
Selling Price
$39.99
Total Costs
$0.00
Ad Spend
$0.00
Net Profit per Order
$0.00
Profit Margin
0%
ROI on Ad Spend
0%
Cost Breakdown
Rule of thumb: A sustainable dropshipping product needs a ≥20% net margin after ad spend. Use the ROAS field to model different ad performance scenarios.
How to Calculate Dropshipping Profit (The Complete Guide)
The biggest mistake new dropshippers make is calculating profit by simply subtracting the product cost from the selling price. The real formula has five components: product/COGS cost, shipping, returns allowance, platform/payment fees, and ad spend per order. Ignore any of these and your business model breaks at scale.
The Dropshipping Profit Formula
− Product Cost
− Shipping Cost
− Returns Allowance
− Platform Fee
− Ad Spend
Margin % = Net Profit ÷ Selling Price × 100
What Is a Good Dropshipping Margin?
A viable dropshipping product typically needs a 20–40% net margin after all costs including ads. Below 15%, there's not enough buffer for ad performance fluctuations, refunds, and chargebacks. Some high-volume, low-competition products can work at 15%, but they're the exception.
Understanding ROAS in Dropshipping
ROAS (Return on Ad Spend) = Revenue ÷ Ad Spend. A ROAS of 3× means for every $1 spent on ads, you generate $3 in revenue. Your break-even ROAS is: 1 ÷ (Gross Margin %). If your margin before ads is 40%, your break-even ROAS is 2.5×. Anything above that is profitable.
Platform Fee Comparison
- Shopify Basic: $39/mo + 2.9%+$0.30 (Shopify Payments)
- Etsy: $0.20 listing + 6.5% + 3%+$0.25
- Amazon FBM: 8–15% referral fee (category-dependent)
- eBay: 10–13% final value fee + 2.9%+$0.30
Tips to Improve Dropshipping Margins
- Negotiate bulk pricing with your supplier once volume is proven
- Bundle products to increase average order value without increasing ad spend proportionally
- Focus on products with low return rates (electronics and fragile items are high-risk)
- Use Shopify Payments to avoid the extra third-party gateway fee
Frequently Asked Questions
How do I calculate dropshipping profit?
Net Profit = Selling Price − Product Cost − Shipping − Returns Allowance − Platform Fee − Ad Spend. Divide by selling price to get your margin %.
What is a good profit margin for dropshipping?
20–40% net margin after all costs including ads is considered healthy. Below 15% is risky due to ad volatility and refunds.
What platform fees should I include?
Include payment processing (Shopify Payments: 2.9%+$0.30), your monthly subscription allocated per order, and any marketplace fees (Etsy's 6.5% transaction, Amazon's referral fee, etc.).
What is break-even ROAS?
Break-even ROAS = 1 ÷ Gross Margin (before ads). If your gross margin is 40%, your break-even ROAS is 2.5×. Any ROAS above this is profitable; below this, you lose money on ads.