What should you do with the profit?
Hey, so yesterday we landed here…
Revenue 100%
Product cost −60%
Overheads −10%
Marketing −10%
= Profit 20%
A $100k revenue business with branded products can pocket $20,000 vs $5,000 dropshipping.
Same everything, just a different product cost.
So now you’ve got that $20k sitting there… you’ve got a decision to make…
Do you keep it… or do you put some of it back into the business?
Most founders either pocket it without thinking, or reinvest blindly because “more ads = more growth” and hope for the best.
But there’s a smarter way to think about this, and it starts with one metric.
CPA (Cost per acquisition)
All this means is “what did you pay to buy one customer?”
If you spent $10,000 on ads and got 100 orders, your CPA is $100.
That’s it. You’re just converting a big overall number into a per-order number so it’s easier to work with.
The reason CPA matters here is because it’s the bridge between ad spend and orders.
If your CPA stays roughly stable, then spending more on ads gives you a predictable outcome… more orders, more revenue, more to work with.
So let’s use it.
In our example, $10,000 in marketing across 100 orders gives us a CPA of $100.
Now here’s the question… what happens if we take some of that 20% profit and move it back into the marketing bucket?
Let’s say we move 5%.
Marketing goes from 10% to 15%.
At a stable CPA of $100, that extra spend brings in roughly 50 more orders.
Revenue grows from $100k to $150k. And now the model looks like this…
Revenue 100% ($150,000)
Product cost −60% ($90,000)
Overheads −10% ($15,000)
Marketing −15% ($22,500)
= Profit 15% ($22,500)
Notice what happened there?
Profit percentage dropped from 20% to 15%.
But profit dollars went up from $20,000 to $22,500.
That’s the thing most people miss. They see the percentage drop and think they’re going backwards.
But the total dollars extracted from the business went up.
It’s not the percentage that matters. It’s what you actually take home.
But here’s where it gets interesting… and a little dangerous.
Because if reinvesting 5% grew profit dollars, you might think “why don’t I reinvest more?”
Let’s model it out…
+1% marketing (11% total)… $20,900 profit
+2% marketing (12% total)… $21,600 profit
+3% marketing (13% total)… $22,100 profit
+5% marketing (15% total)… $22,500 profit ← peak profit
+7% marketing (17% total)… $22,100 profit
+10% marketing (20% total)… $20,000 profit
+15% marketing (25% total)… $12,500 profit
There’s a peak. And then profit starts going backwards.
At +10% you’ve spent more, worked harder, scaled your revenue… and ended up with the exact same profit dollars you started with.
At +15% you’ve actually gone backwards.
This is why “spend more on ads” without understanding the economics of your business is such a trap.
You can scale revenue aggressively and quietly destroy your profit at the same time… and not even realise it until it’s too late.
The goal isn’t to maximise revenue. It isn’t to minimise ad spend either.
It’s to find the point where total profit dollars are at their highest… and that point is different for every business depending on your product cost, your overheads and your CPA.
Back when I was pulling 10% out of thin air and handing it to that agency… I had no idea where my peak was. I was just guessing.
And that’s the problem most founders have. Not that they’re lazy or bad at business.
Just that they’re making decisions without being able to see the numbers clearly.
In the next email, I’ll show you the tool we use to see all of this in real time… every single day.
Because knowing the theory is one thing. Knowing your actual numbers is what changes the decisions you make.
— Matthew