What it really costs

The first cost is opening the shop. That is small, and it is the number the videos quote. The second is finding out whether anyone will buy, and that is the number that matters, because it is spent whether or not it works.

• Price. What the customer pays you, including any shipping you charge.
• Cost of goods. What the supplier charges for the item.
• Supplier shipping. What the supplier charges to send it. Part of the cost of goods, never an afterthought.
• Processing. A percentage of the order plus a fixed fee per transaction. Small per order, and it never stops.
• Refund allowance. A slice of every order set aside, because some orders come back and the money does not.

Price minus those four is your contribution margin - what one order actually contributes before you have paid for a single click.

Everything else in this course is one question: can you buy a customer for less than that? If the margin on a product is under about a fifth of its selling price, walk away from that product before you spend anything on it.

The sixth line decides everything and cannot be looked up: what it costs you to get one order. You buy attention in an auction. The price depends on how good your video is, how many others are bidding for the same eyeballs that week, and how well your page converts the people who tap. Nobody can tell you that number in advance. Not us, not a course, not a supplier. You find it by spending money and reading the result.

Say your contribution margin on one order is M. Say it takes C clicks to produce one order, and each click costs P. Your cost per order is C times P, and the order makes money only when M is bigger than that.

Two things follow. A thin margin needs a conversion rate an unknown store will almost certainly not get. And a cheap product leaves no room in the price for the auction at all.

• The gap between spend and payout. Ads bill on their schedule, the supplier on order. Your processor pays on a delay, and a new account is often held longer or kept in a reserve. Without cash to bridge that gap you stop mid-test on timing alone.
• The refund that costs twice. You lose the goods and shipping you already paid, plus the advertising that produced the sale. One refund can wipe out several good orders.
• Registering the business, tax and record-keeping. What is required depends entirely on where you live. Budget the category, and check your local rules before money is moving.

A total would be a guess dressed as a fact. The shape is this: the shop is the small part, the sample is the honest part, and the ad test is nearly all of it. Budget the test and treat the rest as rounding.

Spend it as one decision. Splitting the same money across three products is not three tests - it is three experiments too small to tell you anything, with less money left afterwards.