Check a store idea before funding inventory or ads.

An ecommerce idea needs more than a selling price. Start by asking what remains after the costs associated with an order. For this exercise, contribution means selling price minus the variable costs you have included. It is not net profit: tax, fixed costs, your time and missing expenses still matter.

Write the price, product cost, shipping paid by you, payment processing, refund allowance, acquisition cost and packaging. Label every number Invented assumption. A refund allowance is a planning assumption, not a record of what customers will do. Do not call a scenario typical for a platform or supplier.

Use an invented desk organiser at US$29. Product cost is US$8, shipping US$4, processing US$1.17, refund allowance US$1.45, acquisition US$6 and packaging US$0.50. The included costs total US$21.12, leaving US$7.88 contribution per hypothetical order. That calculation does not establish a viable business.

Change acquisition cost to US$10. Contribution becomes US$3.88. If the hypothetical fixed test budget is US$60, you would need sixteen orders at that contribution to cover that budget, before tax, time and excluded costs. The exercise shows sensitivity to an assumption; it does not predict sales.

Finish by listing what the numbers do not tell you: whether anyone wants the product, whether the supplier delivers, which obligations apply, when cash leaves your account and how refunds are funded. Dropshipping removes the need to hold some inventory, but does not remove cash-flow, fulfilment or customer-service responsibilities. No product order, store subscription or ad spend is required for this lesson.

Worked example

Fictional scenario: Priya changes only the acquisition assumption in the desk-organiser calculation. At US$6 acquisition, US$7.88 remains per hypothetical order. At US$10, US$3.88 remains. At US$14, the contribution is negative US$0.12.

Her decision is to investigate the missing supplier and demand evidence before any spending. No supplier quote, real store, advertising result or student income is represented.

Your exercise

1. Copy the seven fictional input amounts into a document.
2. Calculate the contribution for acquisition costs of US$6, US$10 and US$14.
3. For each positive contribution, divide the US$60 hypothetical fixed budget by contribution and round the required orders up.
4. List at least four unknowns the calculation cannot resolve.
5. Write one stopping condition for a possible later test.
6. Keep all numbers labelled hypothetical and save your brief.

Check your work

• Every input is labelled an invented assumption.
• Contribution is distinguished from net profit.
• Negative contribution is identified before any break-even calculation.
• Required orders are rounded up and are not described as forecast sales.
• Supplier, demand and cash-flow questions remain visible.
• No purchase, store account or advertisement is needed for the exercise.