Estimate your Shopify cost per purchase before you spend

Why estimate it before you spend

Break-even ROAS tells you what a sale needs. It does not tell you whether your ads can deliver it. Before you have any account history, you can still estimate the cost of one purchase from three numbers you can guess within a reasonable range: CPM, click-through rate, and conversion rate. If the estimate is far above the money one order leaves, you have learned that for the price of a calculator rather than a test budget.

Treat the result as a sketch. Every input is an assumption until your own ad account replaces it.

The three inputs and the formula

• CPM is what you pay per 1,000 impressions. Your ad account shows it for campaigns you have already run. For a first test, use a figure from a similar account you have access to, or start with the account's own estimate.
• Click-through rate (CTR) is the share of impressions that become clicks.
• Conversion rate is the share of clicks that become orders. Shopify analytics shows it for the store.

1. Cost per click = CPM ÷ (1,000 × CTR).
2. Cost per purchase = cost per click ÷ conversion rate.

Write CTR and conversion rate as decimals when you do it by hand: 1.2% is 0.012. The calculator takes percentages and does this for you.

How to run it

1. Open the Shopify profit calculator.
2. Enter the selling price and product cost.
3. Put shipping and the payment fee into fixed fees per order. Add packaging if you pay for it.
4. Enter CPM, CTR and conversion rate. Use your own numbers where you have them. If you do not, use cautious guesses and mark them as guesses.
5. Read four outputs: estimated cost per purchase, break-even ROAS, profit per sale, and net margin.
6. Change one input at a time to see which one decides the result.

Worked example

These are example figures, not benchmarks. A $42 serum costs $9. Shipping and the payment fee come to $6.02, so each order leaves $26.98 before ads. The plan assumes a $12 CPM, a 1.2% CTR and a 2% conversion rate.

• Cost per click: $12 ÷ (1,000 × 0.012) = $1.00
• Cost per purchase: $1.00 ÷ 0.02 = $50.00
• Profit per sale: $26.98 − $50.00 = −$23.02

On these assumptions every sale loses $23. The break-even ROAS of 1.56 is not the problem. The plan would need to reach 42 ÷ 50 = 0.84 ROAS, which is below it. Now see what moves the result:

• A better ad. CTR rises to 2.0%. Cost per click falls to $0.60 and cost per purchase to $30. Still a $3.02 loss per sale.
• A better page too. Conversion rises from 2% to 3% as well. Cost per purchase is $20, and each sale keeps $6.98, a net margin of about 17%.
• A bigger order. Sell a $76 two-pack that leaves $49.50. At the original 2% conversion and a $0.60 click, the $30 cost per purchase now leaves $19.50 per sale.

The same arithmetic gives the conversion rate you need. Divide the cost per click by the money one order leaves. At $1.00 per click and $26.98 left, you need about 3.7% of clicks to buy. At $0.60 per click you need about 2.2%.

Which input matters most

Cost per purchase is CPM divided by a thousand times CTR times conversion rate, so the three inputs act in the same way: CPM pushes cost up, and CTR and conversion rate pull it down. A change of the same size in any of them moves the answer by a similar share. Using the example above ($50 per purchase):

• CPM 20% higher ($14.40): cost per purchase rises to $60.00.
• CTR 20% higher (1.44%): it falls to $41.67.
• Conversion rate 20% higher (2.4%): it falls to $41.67.

The practical point is that you are rarely stuck on one input. A page that converts a fifth better and an ad that earns a fifth more clicks together cut the cost by almost a third, from $50 to about $34.72. Modest gains on both sides add up.

Which lever to pull

The profit calculator is useful because it shows how little each input has to move to change the answer.

• CPM is mostly set by the auction and your audience. You influence it less than the others.
• CTR is the creative. The hook, the product in use and the offer in the first seconds decide it. Studying live ads with the competitor ads guide is a cheap way to see what others are testing.
• Conversion rate is the page and the offer. Run the landing page through the Shopify CRO Audit to see what is stopping the buy button, then look at order value.
• Money left per order is price and cost. A higher price, a cheaper supplier, or a bundle raises the ceiling the ads must fit under.

Common mistakes

• Treating planning numbers as results. A 2% conversion rate typed into a form is not a measurement. Swap in real figures as soon as you have a week of data.
• Using the storewide conversion rate for a cold audience. Cold traffic to a new product usually converts below the store average.
• Forgetting shipping. The calculator has no separate shipping field, so shipping you pay goes into fixed fees.
• Averaging bundles with singles. Run a bundle as its own product.
• Dropping the decimals. Typing 1.2 as a decimal gives a cost per click one hundred times too small.

Replacing the estimate with real numbers

An estimate is only useful until the first data arrives. After a few days of spend:

1. Take cost per purchase from the ad account, or work it out yourself: ad spend divided by purchases over the same dates.
2. Check the purchase count against your Shopify orders for the same dates. Ad platforms and your store rarely agree exactly, and the store is the one that gets paid.
3. Put the real CPM, CTR and conversion rate back into the calculator, one at a time, to see which of your guesses was furthest off.
4. Rerun the break-even. If the real cost per purchase sits above what an order leaves, change the price, the bundle or the creative before you add budget.

Give a test enough spend to be meaningful before you judge it. A few clicks and no purchases is not evidence that a product fails, and one lucky sale is not evidence that it works. Decide beforehand what number of clicks or how many dollars you will spend before you make the call, and stick to it.

What to check next

If the plan loses money, work out what the product needs with the break-even ROAS guide, then see how much each sale keeps in gross versus net margin. If the plan holds up, test it with a small budget and compare the real cost per purchase from your ad account with the estimate here.

Shopify questions