CM1 is gross profit after COGS, fees and freight - before any ad spend. The starting point for max ad spend math.
Formula
CM1 = Gross Revenue − COGS − Marketplace Fees − FreightExampleOn a product selling for $30 with $10 COGS, $5 Amazon referral fee and $3 freight, CM1 is $12. CM1% is 40%.
CM1 is the margin you have to work with before paying for traffic. CM1% (CM1 divided by gross revenue) gives you the upper bound for what ad spend can consume without losing money on the unit.
The TACoS ceiling is CM1% minus your target CM2%. Below the ceiling, the business is profitable. Above it, the unit is bleeding margin.
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