Principle 1
Before we start, you should know that nobody has their cost data sorted. By taking this step and just getting started, you are at a significant advantage vs your competitors.
In this section we will break down the different costs associated with the sale of each product, why it matters to track them and how to do that.
Understanding COGS
Imagine your hero product. You know what it sells for, but do you know how much it costs to buy or produce? That’s your COGS (cost of goods sold). This is what most people set their ROAS on, and it is a very narrow view of how much you make.
Moving beyond COGS
Each cost you don’t track eats into the profit you make when you make a sale. In this guide we will help you understand your other costs, how to find them and how to pull them together to work out the exact margin you have for every product.
These are the costs we will cover over the next few lessons:
- Purchase price (COGS)What you pay to buy or produce the product.
- Payment feesWhat your payment provider charges on every transaction.
- Shipping feesThe part of delivery you pay for that the customer does not.
- Returns and restockingWhat a returned order costs you, spread across every sale.
- Import dutiesExtra fees on the products you import.
- Customer serviceThe time your team spends supporting each order.
- Other feesA catch-all for fixed running costs like agency or operational fees.