Contribution margin calculator
Enter what an average order brings in and what it costs to fulfil and acquire. You'll see what each order leaves to pay fixed costs and profit.
Formula
Contribution margin = order value − variable costs per order
Variable costs rise with every order: product cost, shipping, packing, payment fees and the ad cost of winning the order. Rent, salaries and software are fixed, so they stay out.
New to the term? Read what Contribution margin means in the glossary.
How to calculate contribution margin: a worked example
A supplement store's average order is $65. Product cost is $20, shipping and packing $9, payment fees 3% and ads $18 per order.
- Payment fees = $65 × 3% = $1.95
- Contribution margin = $65 − $20 − $9 − $1.95 − $18 = $16.05
- Contribution margin ratio = $16.05 ÷ $65 = 24.7%
Each order leaves $16.05 to pay for the team, tools and profit.
What is a good contribution margin?
Positive is the first test: if an order loses money before fixed costs, more orders make it worse. After that, a good contribution margin is enough to cover fixed costs at the volume you can sell.
Orders needed per month = fixed costs ÷ contribution margin per order. With $12,000 of monthly fixed costs, the store above needs 748 orders a month to break even.
Questions about contribution margin
- Is contribution margin the same as gross margin?
- No. Gross margin subtracts only the product cost. Contribution margin also subtracts shipping, fees and ad cost per order, so it shows what an order really leaves. It's the better number for deciding how much to spend on ads.
- Should I include ad spend?
- Yes, for paid orders. Ads are a cost of winning each order, so include your cost per order. Some stores track two numbers: contribution before ads and after ads, to see what organic and paid orders each leave.
- How do I raise contribution margin?
- Raise the order value with bundles, cut shipping cost per order by shipping more items together, and lower the ad cost per order with pages that convert better. Each of these works without touching your fixed costs.
Do it with Replo
Track contribution margin per order
Replo combines Shopify costs and ad spend into one daily report of what each order leaves.
Prompt: “email me contribution margin per order every morning”