Revenue is not profit: calculating delivery and user costs
Separate order revenue, delivery contribution, conditional break-even users and available cash in a monthly worksheet.
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Direct answer
Agree on currency, period and included items before discussing profitability. The worksheet supports operating estimates, not formal financial accounting. Here net revenue means orders less discounts and refunds, excluding sales tax collected for others. Payment fees are a separate cost to prevent double counting. Revenue less variable costs produces contribution; fixed and acquisition spending come afterward. Visits, registrations, MRR and net profit are different metrics. Acquisition return must use matching cohorts, time periods and actual paying counts, not a mixture of expected users and annual revenue.
When to use
- Your product calls paid APIs and free use or retries may escape control.
- You see another product’s MRR and want to assess your own sustainability.
Step by step
Measure the full cost of one successful delivery
Test representative short, medium and long inputs. Record successful deliveries, total calls, retries, storage, bandwidth and human effort. Unit delivery cost is all relevant batch costs divided by successful deliveries: failures cost money too. Convert token, image or duration charges using actual bills and a common currency rather than quoting one minimum API price.
Separate four spending categories without counting twice
List paid fulfillment, free trials, fixed operation and acquisition. Split cloud services into a base and usage-dependent component appropriate to the present scale. If refunds already reduce revenue, do not charge them again as full costs; record refund fees and disputes separately. List founder time even when unpaid, so manual fallback is not mistaken for automatic profit.
Calculate contribution and a conditional break-even count
Net revenue per paid user minus associated variable cost is contribution per user. Positive contribution means additional similar users may cover fixed costs. Nonpositive contribution has no finite break-even point achieved merely by selling more. If free and acquisition budgets are temporarily fixed, break-even users equal the ceiling of fixed spending plus free budget plus acquisition budget divided by contribution per user. Recalculate if those expenses also grow with the user count.
Track cash received and future obligations separately
The cash table contains opening available cash, actual receipts, actual payments and closing cash; show unsettled funds, reserves and due bills separately. Do not deduct a fee or refund again if already withheld from a payout. Annual prepayment still finances future service. You may allocate it over service months for operating analysis, while formal recognition follows applicable accounting requirements. Delivery and refund reserves come from your stress scenarios, not a universal safe percentage.
Check acquisition payback and stress cases
For a matching cohort, CAC is acquisition spending divided by new paying users; no paying users does not mean zero CAC. Estimate LTV only with observed retention, contribution and renewal evidence. Early on, compare observed cumulative contribution with acquisition cost. Recalculate heavy use, higher API prices, doubled failures, more refunds and delayed payouts. Set free budgets, allowances, concurrency and stop-taking-orders conditions accordingly.
Worked example
Hypothetical full calculation: profit can coexist with tight cash
Suppose 50 users each pay CNY 60 in one month, producing CNY 3,000 in orders. Refunds of CNY 150 leave net revenue of CNY 2,850. Paid fulfillment costs are model 600, storage 100, support 200 and payment fees 150, totaling 1,050. Contribution is 1,800. Deduct free trials 180, fixed costs 720 and acquisition 300 to leave 600 before founder time, income tax and other omissions. Contribution is 36 per payer; if assumptions stay fixed, covering a 1,200 budget requires ceiling(1,200/36), or 34 payers.
Cash differs: opening cash is 1,000 and the platform pays out 2,400 after withholding the 150 fee; 450 remains unsettled and the refund has not yet been deducted. Actual payments of model 600, storage 100, support 200, free use 180, fixed costs 720, acquisition 300 and refunds 150 leave 1,150 cash. Operating surplus is 600 but cash increased only 150, with the difference in unsettled funds. All amounts, refunds and settlement arrangements are assumptions, not provider prices.
Action checklist
Reusable templates
Simplified cost worksheet
Period / currency / calculation basis:
Paid users and net revenue:
Free and paid task volume:
Model calls, failed retries, storage and transfer:
Payment, refund fees and necessary variable human support:
Contribution = net revenue - variable costs:
Fixed spending and costs still excluded:
Acquisition spend and matching new payers:
Normal / heavy-use / failure scenarios:
Allowances and alerts required:
Monthly operations and cash worksheet
Month / currency / whether collected tax is excluded:
Paid users N___; new payers among them___
Orders A___ - discounts B___ - refunds C___ = net revenue R___
Paid variable cost V: models___ + retries___ + storage/bandwidth___ + support___ + payment/other___
Do not add retries twice if already included in the model bill.
Contribution = R - V; contribution per payer c = (R - V) / N
Free cost F___; fixed K___; acquisition M___
Operating surplus = R - V - F - K - M
Excluded: founder time___ / income tax___ / other___
If c > 0 and F, K, M are fixed: break-even users = ceiling((F + K + M) / c)
CAC = matching cohort acquisition spend / new payers; cohort definition___
[Cash separately]
Opening available cash + actual receipts - actual payments = closing cash
Fees or refunds already withheld from payouts, to avoid deducting twice:
Unsettled funds / reserves / due bills / remaining annual-plan service:
When the stress case runs short of cash, and what to reduce first:
Cost sampling and stress scenarios
Successful-delivery definition:
Input type / successes / total calls / retries / total API cost / storage and human work
Unit cost = all relevant cost / successful deliveries
Monthly tasks, per-task cost and support for normal/heavy users:
Usage rises ___ times -> contribution___
Retry failures increase___ -> contribution___
Unit-price or exchange-rate change___ -> contribution___
Payout delayed___ days, refunds___ -> minimum cash___
Free budget, paid allowance, concurrency and pause rules based on this:
Label measurements and assumptions separately; update after actual bills arrive.
Pitfalls
- Treating monthly visits as active users or estimated MRR as net profit.
- Using imagined years of future renewal to conceal current acquisition losses.
- Treating continuous founder service as free.
- Treating unsettled platform balances as cash immediately available for API bills.
- Using averages to hide heavy users, or omitting consumption by the entire free audience.
- Assuming low marginal cost eliminates updates, support, maintenance and acquisition.