# Ecommerce profit margin calculator: CM1, CM2, CM3 and break-even ROAS

> Work out one order's gross margin and contribution margin after shipping, payment fees, ads and returns, plus break-even ROAS and the price for a target margin.

Source: https://keelhq.io/tools/profit-margin-calculator · Published 2026-10-24 · Last verified 2026-10-24

**TL;DR:** Enter what an order sells for and what it costs, and see the margin at each layer: after cost of goods (CM1), after shipping and payment fees (CM2) and after ads (CM3). It also gives your break-even ROAS and the price that reaches a target margin. Nothing leaves your browser.

## The formulas

net revenue = price × (1 − returns share)

CM1 = net revenue − cost of goods × (1 − returns share)

CM2 = CM1 − shipping − (price × fee rate + fixed fee)

CM3 = CM2 − ad cost per order

break-even ROAS = price ÷ CM2

price for a target margin t on a layer = (cost of goods × (1 − returns) + costs above the layer that do not scale with price) ÷ ((1 − returns) × (1 − t) − fee rate)

Each margin is a share of net revenue. Tax is left out. The target-price formula holds shipping, the fixed fee and ad cost fixed in dollars while the price moves, so if your ad cost rises with price, treat the answer as a starting point.

## Worked example

An order sells for $60 and costs $18 in goods and $6.50 to ship. On Shopify's Basic plan the payment fee is $2.04 (2.9% of $60 plus 30¢). Ads cost $12 an order, and 5% of orders are refunded. Net revenue is $57.00. CM1 is $39.90 (70.0%), CM2 is $31.36 (55.0%) and CM3 is $19.36 (34.0%). Break-even ROAS is 1.91x against an actual 5.00x. To keep a 20% CM3 you would need to charge about $49.11.

## What this does not do

It is a standalone estimate for one typical order, not your books. It ignores tax, discounts, duties, multi-item orders and fixed costs, which Keel HQ's net profit layer takes out. Real return costs vary, and payment fees depend on the card and country.

## When to use it

When you set or change a price, add free shipping, or judge whether an ad channel can pay for itself.

## FAQ

### What are CM1, CM2 and CM3?

Contribution margin after each layer of cost. CM1 is net revenue minus the cost of goods sold. CM2 also takes out variable costs such as shipping and payment processing. CM3 also takes out ad spend. They are the layers Keel HQ reports, here worked out for one order.

### What is the difference between gross margin and CM1?

Gross margin here is (price − cost of goods) ÷ price, the same formula Shopify's profit margin calculator uses, before refunds. CM1 is the same measure on net revenue, after the share of orders you refund.

### How is break-even ROAS calculated?

Return on ad spend is revenue divided by ad spend. At break-even, the ad cost per order equals what is left after cost of goods, shipping and payment fees (CM2), so break-even ROAS is the price divided by CM2. Above it, ads make a contribution; below it they lose money.

### How are returns counted?

As an average over many orders: the refunded share of orders brings in no revenue, their goods go back to stock so their cost is not lost, and the shipping and payment fees on them are not recovered. Your own returns may differ, for example damaged goods you cannot resell.

### What are the payment fee presets?

Shopify Payments' US online card rates by plan on shopify.com/pricing as of 2026-10-24: 2.9% + 30¢ on Basic, 2.7% + 30¢ on Grow, 2.5% + 30¢ on Advanced and 2.25% + 30¢ on Plus. Premium cards, international cards and third-party gateways cost more, so edit the fee fields to match what you pay.

### Does Keel HQ store what I enter?

No. The calculator runs in your browser, and nothing you type is sent anywhere.

## Sources

- [Profit Margin Calculator](https://www.shopify.com/tools/profit-margin-calculator), Shopify (accessed 2026-10-24)
- [Shopify pricing: Shopify Payments online card rates](https://www.shopify.com/pricing), Shopify (accessed 2026-10-24)