Margin, markup and break-even: the numbers shops get wrong

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.