The number I've been hiding from...

Hey {{ First Name | Founder }}

Lately I’ve been going deep on the financial side of eCommerce.
Not ads.
The actual business model underneath it all.

And I’ve had a bit of an epiphany.

For years, I’ve focused heavily on CAC, ROAS, and contribution margin. That’s my world. That’s where marketing has the biggest, most visible impact.

But there’s a piece of the puzzle I’ve often underweighted when thinking about eComm growth:

Opex.

Operating expenses don’t show up in Ads Manager.
They don’t move when you tweak bids or launch new creative.
But they have a massive impact on how fast and how safely an eComm business can grow.
Defined - opex are those fixed costs that come out of your business regardless of how many units you sell - salaries, overheads, software costs.

When you strip it back, there are only three ways to increase your profit margin as a percentage of your revenue:

CAC is hard to reduce if you want to scale. COGs often has some percentage points to be shaved off with better supply chain, but often not much. Opex on the other hand is what I want to dig into more…

In a lot of brands, Opex quietly creeps up.

Product development. Sampling. Shoots. Staff. Agencies. Systems. Rent.
All before revenue has really caught up.

When Opex is high relative to revenue, it creates a hard ceiling on growth because you never have cashflow to reinvest in ads and product.

Even if your CAC is solid, your margins are reasonable and your ads are working.

You still feel “tight”.
You hesitate to invest in ads or order more product.
You scale cautiously because cash-flow feels razor-thin.

From the outside, it looks like a marketing problem.
“We just need to get the ads more efficient.”
Underneath, it’s a business model problem.

Here’s the critical nuance.

If your Opex is bloated or structurally inefficient, scaling will not fix it.
It will just magnify the problem.

Before pushing growth, you need to be confident that:

As a rough guide, many healthy eComm businesses aim to keep Opex in the 10–20% of revenue range at scale (it varies by category, but it’s a useful benchmark).

If you’re already well above that, the priority isn’t more ad spend.
It’s fixing the cost base first.

If Opex is sensible, then scale can actually bring real profit growth. There is a tipping point where you achieve more scale in the business, and Opex stays more or less fixed.

When this happens:

This is often the difference between brands that feel stuck for years and those that suddenly break through to the next level.

Marketing doesn’t directly change your Opex.
But understanding the dynamic of it might change where you put your attention.

Instead of asking your Meta ads person to try to increase ROAS to get more profit (an almost impossible task), you might instead ask them to achieve more scale at the same ROAS.

In both scenarios below you have 4X ROAS, and COGS are 30%

Scenario 1: $100k revenue

➡️ $15k left after Opex

Tight. Conservative. No room to reinvest or take risk.

Scenario 2: $200k revenue

➡️ $60k left after Opex

Huge difference!

The first question to ask is, ‘is my Opex too high’ (higher than 20% is a red flag).

If it is - figure out if it is due to inefficiency, or maybe it is just high 'as a proportion’ of your overall revenue - which could be fixed with more scale and keeping fixed costs the same.

Let me know if you found this useful!

x

Jessie