Published 2026-07-14 · Keelvia blog

How to Calculate Net Profit for a Shopify Store

Net profit = total sales − COGS − transaction fees − shipping costs − ad spend − operating expenses. Shopify shows you the first number and hides the rest, which is why a store doing $20,000 a month can still lose money. This guide walks the exact calculation with a worked example, the margin benchmarks to aim for, and the mistakes that silently overstate your profit.

The full P&L, line by line

• Total sales — gross order value minus refunds and discounts. Use net sales, not GMV.
• COGS (cost of goods sold) — what you paid for the units you actually sold this period, including inbound freight and duties.
• Transaction fees — Shopify Payments or gateway fees, typically 2.4–2.9% + $0.30 per order, plus app subscriptions tied to checkout.
• Shipping — outbound labels, packaging, and the gap between what you charge and what carriers charge you.
• Ad spend — Meta, Google, TikTok. Count spend in the period it ran, not when the platform bills you.
• Operating expenses — Shopify plan, apps, contractors, software, your salary if you pay one.

Worked example

Three checkpoints matter, not one: gross margin tells you if the product economics work (aim 60%+ for DTC), contribution margin tells you if your marketing is affordable (aim 35–50%), and net margin tells you if the business pays you (10–20% is healthy for most Shopify stores; under 5% means one bad month erases a quarter).

The four mistakes that overstate profit

• Using platform ROAS as profit. A 4:1 revenue ROAS on a 40%-COGS product with fees and shipping is roughly break-even, not a win.
• Refunds counted as revenue. Shopify's COGS report can even credit COGS back on refunds that were never restocked, flattering your margin twice.
• Forgetting inbound freight. If landing the product costs 12% of its price, that belongs in COGS, not "somewhere later."
• Annual costs never amortized. Yearly app bills, insurance, and inventory write-offs hit real months even when your spreadsheet skips them.

How often should you check?

Weekly is the practical rhythm: revenue and ad spend move daily, but margins drift weekly. The stores that stay profitable treat the P&L as an operating dashboard, not a year-end report — every pricing change, shipping-rate change, and new hero SKU shows up in contribution margin within days if you're looking.