In plain words
Realized profit is what orders actually earned, as opposed to what an offer was forecast to earn. It starts from the revenue each order really brought in, net of what was refunded, and subtracts the cost of everything the order shipped.
Per offer, it is the check on the forecast. An offer forecast at $15 per order that realizes $11 has something the forecast missed: more refunds, a costlier fulfilment mix, a discount that stacked. Split by option and by first order and renewal, the gap usually points to its cause.
Formula
- Realized profit = Σ over orders (revenue − refunded revenue − realized cost)
Worked example
A $40.00 bag with no refund realizes $17.36. That is more than its $15.36 forecast margin, because the forecast set aside a 5% refund reserve that this order never used.
The same order refunded $10.00 realizes $7.36.
The example order
A $40.00 bag of coffee, shipped free, every cost counted
2 declared kinds cost nothing on this option
| Step | Grain | Amount |
|---|---|---|
| Revenue | – | $40.00 |
| cogs | per unit | −$12.00 |
| pick_pack | per order | −$1.18 |
| packaging | per parcel | −$0.50 |
| shipping | per parcel | −$7.50 |
| processing_fixed | per order | −$0.30 |
| refunds | percent | −$2.00 |
| processing | percent | −$1.16 |
| Gross margin | – | $15.36 |
| 2 kinds costing nothing | – | $0.00 |
Computed by the margin engine in Offer Suite's own code, in whole cents, from a $40.00 bag of coffee with a $12.00 unit cost.
Realized profit is not net profit
It is the orders' own profit, before advertising, salaries, software and rent. Subtract acquisition cost to get the return on a campaign, and fixed costs to get the business's net profit. For comparing offers, those costs are the same whichever offer wins, so leaving them out keeps the comparison fair.
Using it
Compare it with the forecast for the same offer version and the same orders, first orders and renewals apart. A forecast at today's costs against realized profit at the costs recorded months ago is not a like-for-like comparison. When costs have changed since the orders were placed, look at both cost views before concluding the offer missed.
In Offer Suite
Offer Suite reports realized profit per offer and per option, with renewals, refunds and cancellations, in two cost views: as recorded at the sale, and at current costs.
Source: Offer Suite's money definitions (decision 41), checked against real Shopify orders.