Why every eCommerce audit should start with your P&L, not your campaigns

Most brands that reach out to us want us to look at their campaigns. "Our paid is struggling, our ROAS isn't great, can you take a look." And every time I give the same answer. We'll look at the campaigns, yes. But first we build your P&L.

That surprises a lot of people. They come for paid and I start talking about a profit and loss statement. But that's exactly where the problem sits in 80% of cases. You can't know whether your campaigns are good or bad if you don't know how much you can afford to pay to acquire a customer. And your ad platform doesn't tell you that. Your P&L does.

The eCommerce P&L comes before everything else

When we kick off an engagement, we always start with a strategic audit. And within that audit, the first thing we do, the most important one, is build the digital P&L with the client. If you already have one, we analyse it. If you don't, we build it together.

An eCommerce P&L, broadly speaking, is your income statement that starts from your revenue and works all the way down to what you actually keep at the bottom, the famous bottom line. In between, you've got several layers. First the cost of goods sold, what the merchandise itself costs you. That gives you your gross margin. Then your operating expenses, logistics, staff, rent, tools, ads. And what's left at the end is your real profitability.

Where people usually trip up is the way lines are classified. The shipping fees you charge the customer are revenue, not an expense. Returns and refunds get deducted from revenue, otherwise your revenue is inflated and your margin is wrong. The transaction fees from your payment provider eat into your margin and a lot of people forget them. Misclassify one line and you distort the whole reading.

The P&L gives you a precise view of your cost structure. How much it costs you to ship a parcel. What your average order value is. How much your in-house teams cost, your rent, your inventory. From all of that, we derive your maximum tolerable CAC. The amount above which acquiring a customer actually loses you money.

And the way we handle the ad budget isn't to start from a budget. We start from a ratio. We leave ad spend as the unknown and reason backwards. Let's say without ads you're at 40% margin. You tell me your bottom line profitability target, 15%, 20%, whatever it is. From there we know how much is left to put into acquisition to hit your target margin. That's what gives you your target COS and your max CAC.

Until you have that number, everything else is guesswork. And I hate working on guesswork.

A concrete example to make it clear

Take a brand doing between 1 and 2 million euros in revenue, with a 50 € average order value. They want to scale their paid. Except their profitability constraint is tight. A 30 € CPA is simply impossible for them, it puts them in the red.

On top of that, heavy seasonality. 80% of revenue happens during two peak periods in the year. The rest of the time, they spend 3 to 5 k€ a month, then concentrate everything on the peaks. If you look at their campaigns without that context, you understand nothing. A high CPA in a slow month can be perfectly healthy if it's warming up a peak period. And a CPA that looks good can still sink them, if their max CAC sits below it.

All those variables, seasonality, profitability, average order value, mean nothing until you put them against your P&L. Once tied back to the P&L, you know whether to panic or not.

How often you look at it

A P&L you build once and file away in a drive is useless. We look at it every month and compare it to the month before. It's by reading the shift from one line to the next that you spot where a drop in profitability comes from. Your gross margin eroding because product cost went up is not the same issue as your margin falling because your CAC exploded. In one case you go negotiate with your supplier, in the other you rework your campaigns. The P&L tells you which one.

Once the P&L is set, we look at the three channels

Once we know how much we can spend and what we're trying to hit, we move into the channel audit. We look at three, not one. Traffic acquisition first, how you bring people to the site, at what cost, through which channel. Then conversion once they arrive, from the product page to add to cart all the way to checkout. And finally retention, CRM, what you do to get people to come back and buy again.

The last brand we took over came from an agency that handed them a ROAS report every Monday. Not one line on the product page converting at 0.8%. To me that's a cropped view. Everything post-click matters as much as the click. Even when we work only on paid, we're going to analyse the landing pages and product pages. Because you can have the best ads in the world, if your product page converts poorly, you're burning your budget.

The eCommerce funnel is exactly that work. Understanding every step of the journey, from landing on the site to checkout. And spotting where it jams so you can put actions in front of it.

Something we find all the time

A brand tells you "this product is our best-seller." You dig in, and it turns out that product sells well mostly because it's featured everywhere, homepage, menu, banners. No wonder it crushes, it gets ten times the exposure of the others.

And when you go look at the less-exposed products, you realise some have better add-to-cart and conversion KPIs. They sell less in volume, but they perform better at equal exposure. That changes how you push your products and how you buy traffic. And you never find it if you stay glued to your campaign ROAS.

The roadmap runs on 90 days, not 12 months

Once the diagnosis is set, we build a roadmap. And we build it over 90 days, not a year. We've already seen 12-month forecasts blow up by month three, the moment a platform changes its rules or a stockout throws everything off.

This is where the P&L becomes useful again, actually. Once you know your cost structure and your seasonality, you can build a forecast that holds up. You project your fixed costs that hit every month, rent, staff, tools, and on top your variable costs that swell during peaks, ads, logistics, inventory. That way your ad budget matches the reality of your year instead of a smoothed-out average.

So we replay the roadmap every 90 days. At the end of each cycle, we run a diagnosis of what worked and what didn't, and we reprioritise. Same logic for paid, for eCommerce and for CRM. We move in iterations, based on what actually happened, not on a frozen plan we wrote six months earlier.

We work in sprints, one project at a time

A principle I hold strongly. As long as a strategic project is in progress, we don't start another one. We finish it before opening the next.

The classic mistake I see with brands is launching ten projects at once. Product page overhaul, new CRM strategy, paid scaling, new channel. Result, six months later nothing is finished and nobody really knows what moved the needle. We'd rather finish one thing, measure its impact, then move to the next. Nobody finds that exciting. But at least you know what worked.

What this changes for you

It all comes down to order. P&L first, campaigns after. Never the other way around with us.

An audit that starts from your ads will just tell you whether your CPA is 25 € or 40 €. With the P&L first, you know whether those 25 € are a smart play or a disaster for your margin. Same CPA, opposite decision.

The order matters, always the same. The P&L gives you your max CAC and your target margin, the channels come after, traffic, conversion and CRM, and the roadmap gets replayed every 90 days.

The day you know exactly how much you can pay for a customer and what margin you're targeting, you stop flying blind with your ads. And you also stop getting fooled by a ROAS that looks beautiful but is losing you money.