Dropshipping Margin Calculator

Understanding the dropshipping margin calculator — concept and principle

In dropshipping you sell a product online while a supplier ships it straight to the customer, so your profit is whatever is left of the selling price after the supplier, platform fees and advertising have taken their share. This calculator shows profit per order, net margin and the break-even ROAS (return on ad spend) your ads must reach before you make any money. Store owners use it to choose products, set prices and judge ad campaigns. It works with any currency; the example uses US dollars.

How it is calculated

• Fees = selling price × store and payment fee % ÷ 100
• Profit per order = selling price − supplier price (incl. shipping) − fees − ad cost per order
• Margin (%) = profit per order ÷ selling price × 100
• Break-even ROAS = selling price ÷ (selling price − supplier price − fees)

Ad cost per order is your average advertising spend to win one sale (cost per purchase). ROAS is revenue divided by ad spend.

The principle

Before advertising, each sale leaves a contribution: price minus product cost and percentage fees. Advertising is then paid out of that contribution. The most you can spend on ads for one order without losing money is exactly that contribution, so the break-even ROAS is price ÷ contribution. If your campaigns report a ROAS above that number, each order is profitable; below it, every sale loses money even though revenue looks healthy. Because fees are a percentage of price, raising the price increases fees too, which the formula captures.

Worked example

1. Inputs: price $39, supplier $17, fees 5%, ad cost $9 per order.
2. Fees: 39 × 0.05 = $1.95.
3. Contribution before ads: 39 − 17 − 1.95 = $20.05.
4. Profit per order: 20.05 − 9 = $11.05.
5. Margin: 11.05 ÷ 39 × 100 = 28.33%.
6. Break-even ROAS: 39 ÷ 20.05 = 1.95×.

Your $9 ad cost implies a ROAS of 39 ÷ 9 ≈ 4.3, comfortably above break-even.

How to read the result

Margin shows how much room you have for returns, refunds, chargebacks and price tests. Thin margins leave little buffer when ad costs rise. Compare the break-even ROAS with the ROAS your ad platform reports: the gap between them is your safety margin. A low break-even ROAS (such as below 2) means the product can tolerate expensive ads; a high one means you need very efficient advertising or a higher price.

Common mistakes

• Forgetting refunds, returns and chargebacks, which can turn a thin margin negative.
• Using the platform's ROAS without checking it against your own order data.
• Ignoring fixed monthly costs such as store subscriptions and apps.
• Leaving out sales tax, VAT or import duties where they apply.

Frequently asked questions

What ROAS do I need to break even?

Selling price divided by the profit left before ads. In this example, 1.95.

Is a 28% margin good for dropshipping?

It depends on refund rates and fixed costs. Compare with your own history and leave room for rising ad costs.

What is the difference between margin and markup?

Margin divides profit by the selling price; markup divides profit by cost, so markup is always the higher number.

Sources: Kotler, P. & Keller, K. L., Marketing Management, Pearson