Contribution
Contribution is what's left from your sales after product costs and per-order costs (payment fees, shipping, pick-and-pack, discounts, refunds). It's the money available to pay your fixed costs.
- How we calculate it
- Net sales − product cost − variable costs.
- How to read it
- It should be comfortably larger than your monthly fixed costs. If it falls toward them, profit is about to disappear.
- What to do
- Raise prices on products below their floor, cut discount depth, or renegotiate product and shipping costs.
- How often to check
- Weekly for trends, monthly to close the month.
Net profit
Net profit is your contribution minus your fixed costs (rent, payroll, software, agencies, ad spend you enter). It's the real result of the business.
- How we calculate it
- Contribution − fixed operating costs. Per product, each SKU carries its share of overhead in proportion to its sales.
- How to read it
- Look at it as a share of revenue, not just in dollars. A growing store with a shrinking net margin is buying growth with profit.
- What to do
- Start with Products losing money (the products that lose money on every sale), then expense headroom.
- How often to check
- Weekly, and at every month-end.
- Important
- Net profit is not cash. Money from a sale and money in your bank arrive on different dates, and stock you buy is cash out before it is a cost. Taxes (federal, state and sales tax) are not deducted. Check them with your accountant.
Left to break even
Left to break even is how much more you need to sell this month to cover all your costs. Once it reaches zero, every extra sale is profit.
- How we calculate it
- Fixed costs not yet covered ÷ your contribution margin. We also show the projected date you'll cross it at your current pace, and the approximate units it takes.
- How to read it
- Break-even is not profit; it's zero-zero. If the projected date slips past month-end, you'll close at a loss.
- What to do
- Push your Class A profit champions. The cockpit shows which products close the gap fastest.
- How often to check
- Weekly during the month. It resets on the 1st.
Minimum markup
Minimum markup is the smallest multiplier over product cost that still covers per-order costs and each product's share of overhead.
- How we calculate it
- From your real cost structure: product cost, variable costs as a share of price, and fixed costs as a share of revenue.
- How to read it
- Compare it with your current average markup. Products below the minimum lose money on every sale, even when they sell well.
- What to do
- Cost × minimum markup = the floor price. If the floor is above what the market will pay, work backwards: competitive price ÷ minimum markup = the most you can pay your supplier.
- How often to check
- Monthly or quarterly. It moves with your margins and fixed costs.
Floor price
Floor price is the lowest price at which a product breaks even after its product cost, fees, shipping, returns and its share of overhead.
- How to read it
- Products priced under their floor appear in the Products losing money, ranked by the profit they lost last month.
- What to do
- Reprice to floor with one click (written back to Shopify, with undo), or retire the product.
- How often to check
- After any cost change, and before every promotion.
Expense headroom (maximum expenses)
Expense headroom is the most you can spend on fixed costs this month and still break even, based on your average margins.
- How to read it
- Use it before hiring, signing a new tool or raising your ad budget. If a new expense doesn't fit, it must be paid for by better margins first.
- What to do
- Cut or postpone fixed costs, or raise contribution through pricing.
- How often to check
- Monthly, and before any new recurring cost.
