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The most expensive confusion in retail
A product costs you 60 and you want to "make 50%". Add 50% to the cost and you sell at 90 — but that is a 33% margin, not 50%. To actually make a 50% margin you have to sell at 120. We have walked into shops that priced an entire catalogue on the wrong one of those two numbers and could not work out why the year-end profit never matched the plan.
ROAS is not profit, and a ROAS of 4 can lose money
Return on ad spend measures revenue against advertising cost. It says nothing about whether that revenue carried any profit. At a 20% gross margin, a ROAS of 4 means €4 of revenue generated €0.80 of gross profit against €1 of ad spend — you are paying to lose money, and the dashboard is green. Always convert ROAS into ROI using your real margin before you scale a campaign.
Break-even is the question before every launch
Fixed costs divided by the contribution each unit makes tells you how many you must sell before you stop losing money. It is a two-minute calculation and it kills more bad product ideas than any market research. If the honest break-even is a number your sales team has never reached, you have your answer before you have spent anything.
In B2B, lifetime value is the number that justifies everything
A B2B customer who orders eight times a year for five years at a 35% margin is worth far more than a first order suggests, which is why B2B companies can afford acquisition costs that would ruin a D2C brand. A useful rule of thumb: your acquisition cost should stay under a third of lifetime gross profit. Calculate it once and most of your marketing arguments settle themselves.
Put the calculation where the decision happens
The reason these mistakes survive is that the calculation lives in someone's head or in a spreadsheet nobody opens. Put margin next to the price field in your back office, put break-even in the product launch template, and the errors stop being possible rather than being caught. That is a software problem, and it is a cheap one to fix.
Free tool — runs in your browser, nothing is stored.
Open the free business calculators →- Markup is on cost, margin is on price — a 50% markup is a 33% margin.
- Convert ROAS to ROI with your real margin before scaling anything.
- Show margin next to the price field and the error stops being possible.
Frequently asked questions
Markup is calculated on your cost, margin on your selling price — which is why a 50% markup is only a 33% margin. Buy at 60, add 50%, sell at 90: you kept 30 of a 90 sale. To actually earn a 50% margin on that item you have to sell at 120. Whole catalogues get priced on the wrong one of these two numbers, and the year-end profit never matches the plan.
Take your fixed costs and divide them by the contribution each unit makes — selling price minus the variable cost of that unit. The result is how many you must sell before you stop losing money. It is a two-minute calculation and it kills more bad product ideas than any market research. If the honest break-even is a volume your sales team has never once reached, you have your answer before spending anything.
It depends entirely on your margin, and often it is a loss. ROAS measures revenue against ad spend and says nothing about profit. At a 20% gross margin, a ROAS of 4 means 4 euros of revenue produced 0.80 of gross profit against 1 euro of ad spend — you are paying to lose money while the dashboard glows green. Convert ROAS into ROI with your real margin before you scale anything.
Judge it against lifetime gross profit, not the first order. A buyer ordering eight times a year for five years at a 35% margin is worth a multiple of what that first invoice suggests — which is why B2B firms survive acquisition costs that would ruin a D2C brand. A workable rule of thumb: keep acquisition under a third of lifetime gross profit. Calculate it once and most marketing arguments settle themselves.
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