“How do we know what to spend on ads?” Most eCommerce brands think they know the answer. In reality, they’re usually just flying blind - basing decisions on intuition, vanity metrics, incomplete dashboards, or flat out guessing. If you want to run a profitable Shopify business, you need a clear, math-driven framework for setting ad budgets.This guide walks you step-by-step through how to calculate your ad spend using your fixed expenses, variable margin, and contribution profit. By the end, you’ll see exactly why most brands get this wrong, and how to fix it with the right analytics.
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If you’ve been running an ecommerce business for more than 15 minutes—whether on Shopify or another platform—you’ve likely encountered the overwhelming array of performance metrics or key performance indicators (KPIs). From conversion rates to return on ad spend, these numbers can paint any picture you want, often distorting the reality of your profitability.