Why cash on delivery needs its own calculator
With cash on delivery you pay for ads on every order, but you only earn on the ones that are delivered. Some orders are never confirmed, and some are confirmed and then refused at the door. That is why “price − cost” alone shows a profit that isn’t real, and many sellers discover they are losing money on a product that “makes money”.
The formula
- Delivered orders = orders × confirmation rate × delivery rate.
- Returns = orders × confirmation rate × (1 − delivery rate).
- Net profit = delivered × (price − cost − shipping − other costs − fee) − returns × return cost − all orders × ad cost per order.
- Break-even ad cost per order: the ad cost per order at which your profit is zero. Paying more than this means a loss.
Example: 100 orders, price 400, cost 200, shipping 50, ads 40 per order, 70% confirmation, 60% delivery and a return cost of 50. 42 orders are delivered and 28 returned. Revenue 16,800, cost 8,400, shipping 2,100, returns 1,400 and ads 4,000 leave 900 net, about 21.4 per delivered order. The most you can pay for ads is 49 per order.
Frequently Asked Questions
How can I raise my profit without changing the price?
The biggest lever is the delivery rate: every returned order wastes its shipping and its ad cost. Change the delivery rate in the calculator to see the effect, and the same for the confirmation rate and ad cost.
What is the difference between ad cost per order and per delivered order?
Per order: total ad spend divided by all orders received. Per delivered order: total ad spend divided only by delivered orders — the real cost of one sale, and much higher.
What is ROAS?
Return on ad spend: how much delivered revenue each unit of ad spend brought in. 4× means every 1 spent on ads brought 4 in sales. On its own it ignores product and shipping costs, which is why the calculator shows your net profit.
Does it work with any platform?
Yes. It isn’t tied to any platform and uses your own numbers, whether you sell your own stock, use a dropshipping platform or work on commission. Enter what you actually pay under “Product cost”, and any fees deducted from you under the other costs.