How to calculate TCO for your ecommerce platform: 7 steps, worksheet and 3-year example

In short

• The TCO formula: TCO = one-off costs + (recurring costs per year × number of years). For a platform decision, calculate over at least three years and add up each year separately, so growth and price changes stay visible.

• Seven steps: define scenarios and horizon, list every cost item, split one-off from recurring costs per year, fill in real numbers, calculate, express TCO as a percentage of revenue, and stress-test your assumptions.

• In our illustrative example, staying on Magento is cheaper for the first two years. Shopify Plus becomes cheaper in year three because recurring costs are lower. The break-even point tells you more than the total.

• Only compare costs that differ between options. Marketing and fulfilment usually cost the same on every platform and only blur the comparison.

Most articles about total cost of ownership explain what TCO is. This one is the worksheet version. You get a step-by-step plan, a fill-in table per cost item and a fully worked three-year example that compares an existing Magento store with Shopify Plus. If you want the background first (what TCO is, the main cost categories and how platforms such as Shopify, Shopware, commercetools and Adobe Commerce compare), start with our guide to TCO for ecommerce platforms.

We use this method whenever a brand asks us whether a platform switch pays off. As a Shopify Platinum Partner (top 0.5% worldwide) with more than 350 migrations and over ten years of experience, we see the same pattern again and again: the outcome rarely depends on the licence fee. It depends on hosting, maintenance, integrations and the hours your own team spends keeping the platform running.

The TCO formula, and the version that works better

The basic formula is simple:

TCO = one-off costs + (recurring costs per year × number of years)

It is a good starting point, but it assumes recurring costs stay flat. In practice they don't. Hosting grows with traffic, app prices scale with order volume or number of contacts, retainers are indexed each year, and some platform fees depend on revenue. So in your worksheet, add up each year separately:

TCO over 3 years = one-off costs + recurring costs year 1 + recurring costs year 2 + recurring costs year 3

One-off costs usually land in year 1 (build, migration, integrations), but not always. A major version upgrade in year 2 or rebuilding an ERP connection in year 3 are one-off costs too. Put them in the year they actually happen, otherwise your cash flow picture is wrong.

How to calculate TCO in 7 steps

Step 1: Define the scenarios and the time horizon

Decide exactly what you are comparing. The most common set-up is "stay on our current platform" versus "migrate to platform X". Always include the current situation as a scenario. Staying is never free, and it is the baseline every alternative has to beat.

Choose a period of at least three years. A one-year view makes every migration look expensive, because all one-off costs fall into that single year. For larger or enterprise set-ups, add a five-year view as well: that is closer to the real lifespan of a platform. Where possible, align the horizon with your contract terms, such as a platform agreement or a hosting contract.

Step 2: List every cost item

Walk through your stack from storefront to back office. For each item, ask one question: does this cost exist in scenario A, in scenario B, or in both? Use this checklist:

• Platform and licence: subscription, licence fees (Adobe Commerce is priced on request, based on revenue; Magento Open Source has no licence fee), and any revenue-based platform fees.

• Hosting and infrastructure: servers, CDN, monitoring, backups, staging environments. On a SaaS platform such as Shopify, hosting is included in the subscription.

• Build or migration: design, theme or front-end, data migration, URL redirects, testing.

• Integrations: ERP, PIM, WMS, CRM and marketplace connections, plus the middleware or connectors that run them.

• Apps and extensions: monthly apps and annual extension licences.

• Maintenance and security: patches, version upgrades, extension compatibility, uptime and performance monitoring.

• Further development: the features on your roadmap for the coming three years.

• Internal hours: time your own team spends on technical issues, releases, testing and managing suppliers.

• Payment costs: only if they differ between scenarios, for example because a platform charges an extra fee when you use a third-party payment provider.

• Transition costs: running two platforms in parallel, training, and SEO safeguards such as redirect mapping and post-launch monitoring.

Which of these costs tend to stay invisible, specifically when you compare Magento and Shopify, is covered in the 5 hidden costs of Magento vs Shopify.

Step 3: Split one-off and recurring costs, per year

Put every item in a worksheet with one row per cost item and one column per year. This is the template we start from. Copy it into a spreadsheet and fill in one copy per scenario:

Step 4: Fill in real numbers, not gut feeling

Your TCO is only as good as its input. Use sources in this order of preference:

1. Invoices and contracts from the last 12 months (hosting, licences, apps, agency hours). This is your hardest data for the current scenario.

2. Quotes for the new scenario, requested on the same scope. Otherwise you end up comparing a detailed quote with a rough estimate.

3. Time tracking for internal hours. No time tracking? Ask the team to log every hour spent on platform issues for four weeks and extrapolate.

4. Pricing pages for subscriptions and apps. For Shopify, check the current Shopify pricing. Shopify Plus starts at around €2,100 per month (indicative, it can vary by contract).

Where you genuinely don't know, work with a range (low, expected, high) instead of a single number. You will need that range in step 7.

Step 5: Calculate TCO per scenario

Add up the costs per year, then cumulatively. Look at three figures: the TCO over the full period, the recurring cost per year once the one-off costs are behind you, and the cumulative line year by year. That last one shows when a more expensive start pays for itself: the break-even point.

Step 6: Express TCO as a percentage of revenue

An absolute amount says little without context. Divide the annual TCO by your gross merchandise value (GMV) to get TCO as a percentage of revenue. That makes scenarios comparable across different growth paths and shows how your platform costs relate to your gross margin. Calculate it for each year: in a healthy set-up, the percentage goes down as revenue grows.

Step 7: Stress-test your assumptions

Take the three items with the most uncertainty (usually migration costs, maintenance and development hours) and move them 20 percent up and down. Does the conclusion hold? Then your decision is solid. Does it flip? Then the decision depends on those assumptions, and that is where you need a sharper quote or better data before you choose.

Worked example: Magento vs Shopify Plus over 3 years

Here is the method applied to a realistic case. Worked example, amounts for illustration only. The proportions are realistic, but your own numbers will be different. Don't copy the amounts, copy the structure.

The situation: a fashion and lifestyle brand with an assumed €8 million in online revenue per year, running on self-hosted Magento 2 Open Source with an ERP and PIM connection. The installation needs an upgrade to a current version within the year. Scenario A is staying on Magento and doing that upgrade. Scenario B is migrating to Shopify Plus.

Marketing, fulfilment and customer service are left out, because they cost the same in both scenarios. Payment costs are assumed to be equal as well, because the brand keeps comparable payment terms. If that is not true for you, add them.

A few notes on the assumptions. The Shopify Plus fee is based on the starting price of €2,100 per month (September 2026) plus a margin for the variable fee, rounded up. At higher revenue levels, Shopify Plus can include a revenue-based fee, so always calculate with your own quote. Apps cost more in scenario B because functions that were extensions or custom code on Magento are often apps on Shopify. Further development is lower in scenario B because part of the roadmap is covered by standard functionality and apps, which are already counted in the app line.

The result, year by year

What this example shows

• Over two years, staying is cheaper. Anyone who calculates with a one- or two-year horizon will conclude that migrating does not pay off.

• The break-even point falls in year three. The extra one-off investment of €105,000 is earned back by €45,000 lower recurring costs per year, after roughly 28 months.

• Over five years, the gap grows to €120,000, because the difference in recurring costs keeps adding up every year.

• Recurring TCO as a share of revenue drops from about 2.0% (€159,000 on €8 million) to about 1.4% (€114,000 on €8 million).

The stress test

Now apply step 7. Suppose the migration turns out 20 percent more expensive (€108,000 instead of €90,000). The three-year TCO of scenario B rises to €505,000, still below A. But suppose your Magento maintenance is 20 percent cheaper than assumed (€36,000 instead of €45,000). Then scenario A drops to €490,000 over three years, and the two scenarios are practically equal. Over five years, B still comes out €75,000 lower.

The takeaway: in this example, the three-year decision is close and depends on one assumption, the maintenance cost. The five-year decision is clear. That is exactly the kind of insight a TCO calculation should give you, and it tells you where to invest in a sharper quote before you decide.

Common mistakes when calculating TCO

• Comparing only licence or subscription fees. The platform fee is often one of the smaller lines. Hosting, maintenance and development usually weigh more.

• Forgetting internal hours. Time your team spends on bugs, releases and supplier calls is real cost, even if it never shows up on an invoice.

• Setting the current platform at zero. An upcoming upgrade, the end of support for your version or a hosting contract renewal are real costs of staying.

• Choosing a horizon that is too short. With one year, every migration loses. Use three years as a minimum and five as an outlook.

• Including costs that are the same everywhere. Marketing and fulfilment matter for your business, but in a platform comparison they add noise and make real differences look small in percentage terms.

• Ignoring growth. Hosting scales with traffic, apps are priced by volume and some platform fees scale with revenue. Model years 2 and 3 with your growth plan, not with this year's figures.

• Comparing a quote with a guess. If scenario A is based on invoices and scenario B on a rough estimate, the comparison is skewed. Get both to the same level of detail.

• Forgetting the transition. Parallel running, a content freeze, redirect mapping and training all cost money. A migration without a solid redirect plan can also cost organic traffic.

How to use the outcome for your platform decision

A TCO calculation does not make the decision for you. It tells you what each option costs, so you can weigh that against what each option delivers. Use the outcome like this:

1. Look at the curve, not only the total. When is the break-even point, and does it fall within the period you expect to stay on the platform?

2. Check the margin of uncertainty. If the scenarios are within each other's range after the stress test, cost is not the deciding factor. Decide on speed, risk and team capacity instead.

3. Put the revenue side next to it, separately. Faster time to market, better conversion or easier international expansion are real benefits, but harder to predict. Keep them out of the TCO itself and present them as a separate business case, so your cost calculation stays verifiable.

4. Weigh the non-financial factors. How dependent are you on specific developers? How quickly can you launch a new market or B2B channel? Since April 2026, Shopify B2B is available on all plans, not only on Plus, which lowers the threshold for wholesale.

5. Present it on one page: scenarios, key assumptions, cumulative TCO per year, break-even point and stress test. That is what a CFO or board needs to decide.

For the full comparison beyond costs (features, scalability, SEO, B2B and international), read Magento vs Shopify: the complete comparison.

Integrations: the cost item that makes or breaks your TCO

In our experience, the widest spread in TCO calculations is not in the platform fee but in integrations. An ERP connection built as custom code needs work with every update on either side. A connection through a standard connector or middleware costs a monthly fee, but shifts maintenance to the supplier. Include both the build and the ongoing management in your worksheet, and ask for them as separate lines in every quote.

ERP and PIM integrations are a core competency of our team. See how we approach Shopify ERP integration. In practice, this is where the savings come from: for OGÉR we moved from Magento to Shopify Plus and brought five stores and the webshop together in one system (read the OGÉR case). Mason Garments also moved from Magento to Shopify Plus, and for Lions Fashion Group a low TCO was the starting point of the platform design.

Conclusion: stay or switch?

The formula is simple. The value is in the discipline: complete cost items, real numbers, at least three years, and a stress test. Then the outcome points in a clear direction.

Choose to stay on Magento or Adobe Commerce if:

• your installation is up to date and recently upgraded, so no large one-off costs are coming,

• you run unique custom logic (checkout, pricing, product configurators) that would be expensive to rebuild on a SaaS platform,

• you have an in-house development team that is well utilised and would be there anyway,

• your TCO calculation shows the scenarios within each other's range, even over five years.

Choose to migrate to Shopify or Shopify Plus if:

• hosting, maintenance and upgrades make up a large part of your recurring costs,

• a major upgrade or rebuild is coming anyway, so you will pay one-off costs either way,

• your team spends more time on the platform than on customers and growth,

• you want to run several stores, markets or a B2B channel from one system.

Want a second pair of eyes on your numbers? As a Shopify agency and Platinum Partner, we review your assumptions, fill in the Shopify scenario with a realistic quote and show where your break-even point lies. Read how we plan a Shopify migration, or get in touch to go through your TCO calculation together.