Worked example: a small store
This page is for owners of a small business who want to sell online and need to know whether a store on Exponential pays for itself. It walks through a first-year and a five-year calculation for an invented store, one step at a time, so you can repeat it with your own figures.
Note
The store, its sales and every cost below are Example assumptions: round numbers in a neutral currency unit, chosen to make the arithmetic easy to follow. They are not market data, not prices of any provider and not the results of any real shop. Replace each one with your own figures.
Contents
- What the store uses
- The inputs
- Step 1: the costs
- Step 2: the gross profit from online sales
- Step 3: ROI and break-even
- Step 4: what downtime would cost
- What to change for your store
What the store uses
The facts that shape the cost lines, each from the repository:
| Need | What Exponential provides | Source |
|---|---|---|
| Catalog, basket, checkout, orders | "Advanced e-Commerce Stores (Built in)" | README.md, "Main Exponential features"; Shop overview |
| VAT and prices | VAT types and rules, currencies | Products, prices and VAT |
| Payments | ezpaypal is required by composer.json; other gateways are extensions | Payment gateways |
| Order overview | Store dashboard and order statuses | Store dashboard |
| Receipts | Permanent order receipts | Order receipts |
| Database | SQLite 3, no database server, enough for one machine | Database support |
So the example has no line for a shop add-on or a shop license. Payment provider fees remain; they are set by the provider you choose.
The inputs
| Input | Value |
|---|---|
| Example assumption: setup by a partner (design, product classes, payment, launch) | 8,000 currency units, once |
| Example assumption: hosting plan | 50 currency units a month |
| Example assumption: maintenance and updates | 10 hours a year at 60 currency units an hour |
| Example assumption: online orders | 100 a month |
| Example assumption: average order value | 40 currency units |
| Example assumption: gross margin on goods | 30 % |
| Example assumption: payment provider fees | 3 % of turnover |
| License fee | 0 (fact: README.md, "License") |
Step 1: the costs
First year:
- Setup: 8,000.
- Hosting: 50 x 12 = 600.
- Maintenance: 10 x 60 = 600.
- License: 0.
- First-year cost (without payment fees): 8,000 + 600 + 600 + 0 = 9,200.
Each later year: 600 + 600 = 1,200.
Five years: 9,200 + (1,200 x 4) = 9,200 + 4,800 = 14,000.
Step 2: the gross profit from online sales
- Turnover per month: 100 orders x 40 = 4,000.
- Turnover per year: 4,000 x 12 = 48,000.
- Gross margin per year: 48,000 x 30 % = 14,400.
- Payment fees per year: 48,000 x 3 % = 1,440.
- Gross profit after payment fees: 14,400 - 1,440 = 12,960.
Step 3: ROI and break-even
First year:
- Net benefit: 12,960 - 9,200 = 3,760.
- ROI: 3,760 / 9,200 x 100 % = about 41 %.
Five years:
- Gross profit after fees: 12,960 x 5 = 64,800.
- Costs: 14,000.
- Net benefit: 64,800 - 14,000 = 50,800.
- ROI: 50,800 / 14,000 x 100 % = about 363 %.
Break-even on the setup: monthly gross profit after fees is 12,960 / 12 = 1,080; monthly running costs are 1,200 / 12 = 100; so each month adds 1,080 - 100 = 980 towards the setup. 8,000 / 980 = about 8.2 months.
Warning
This assumes the online orders are new business. If some would have come in by phone or in the shop anyway, count only the extra orders. That is the most common mistake in a store business case.
Step 4: what downtime would cost
- Example assumption: the store is offline for 4 hours on a busy day.
- Gross profit after fees per hour, averaged over the year: 12,960 / (365 x 24) = about 1.5 currency units.
- On a busy day orders cluster; Example assumption: busy hours bring ten times the average: about 15 an hour.
- Lost gross profit: 4 x 15 = 60, plus the staff time to answer customers and the orders that never come back.
For a small store the direct loss of a short outage is modest; the lost trust is not. The Cost of downtime worksheet adds the other lines, and Store performance at peak times explains how to stay up on the busy days.
What to change for your store
- To do: Replace every Example assumption with your figures and write the source beside each.
- To do: Add lines for product photography, content writing and shipping materials if you buy them.
- To do: Add your payment provider's real fee structure from its contract.
- To do: Count only the orders the store adds, not those it moves from another channel.
- To do: Check VAT duties for the countries you sell to (VAT rules and VAT types).
- To do: Plan the launch with the Store launch checklist.
Related pages
- Stores
- Store planning for small businesses
- Total cost of ownership
- ROI worksheet template
- Free documentation: this page is free to copy, translate and improve under the GNU FDL 1.3.
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