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Contribution margin calculator

Enter a month of revenue and costs. You get each level of contribution margin, from CM1 after product costs to CM4 after operating expenses, in dollars and as a share of net revenue.

Your numbers

Software, salaries, rent

Results Example figures. Change any field.

CM3

$25,000 27.2%

Net revenue $92,000

CM1 67.4% $62,000

CM2 54.3% $50,000

CM3 27.2% $25,000

CM4 16.3% $15,000

The formula

How it’s calculated.

CM3 = net revenue − product costs − shipping, fulfillment and fees − marketing

Worked example

$100,000 of gross revenue less $8,000 of discounts and returns is $92,000 net. Take off $30,000 of product costs for a CM1 of $62,000 (67.4%), $12,000 of shipping, fulfillment and payment fees for a CM2 of $50,000 (54.3%), $25,000 of marketing for a CM3 of $25,000 (27.2%), and $10,000 of operating expenses for a CM4 of $15,000 (16.3%).

What each level tells you.

CM1 is net revenue minus product costs: your product margin. CM2 also takes off shipping, fulfillment and payment fees, which is what each order really leaves.

CM3 takes off marketing and is the number most DTC teams run the business on. CM4 takes off operating expenses, so it is operating profit.

Why CM3 beats ROAS for budget decisions.

A campaign at 3× ROAS on a 22% margin product is losing money, because ROAS ignores what the order costs to make and ship. CM3 doesn’t.

Upstack Attribution reports CM1 through CM4, with product costs pulled from Shopify and spend read from your ad accounts, so margin by channel is a number you read rather than a spreadsheet you rebuild.

See how Upstack Attribution reports it →

More calculators

Related calculators.

  • Break-even ROAS calculator

    The ROAS and CPA where ads stop losing money, and the targets that leave a profit.

    Break-even ROAS = order value ÷ (order value − product, shipping and fee costs)

  • MER calculator

    Marketing efficiency ratio, new-customer MER, and how much revenue the platforms claim.

    MER = total revenue ÷ total ad spend

  • LTV calculator

    Lifetime value in revenue and gross profit, LTV:CAC, and CAC payback.

    LTV = order value × orders per year × years as a customer × gross margin

Questions

Contribution margin questions.

How do you calculate contribution margin?

Start from net revenue, which is sales after discounts and returns, and subtract variable costs in steps: product costs for CM1, then shipping, fulfillment and payment fees for CM2, then marketing for CM3. Divide any level by net revenue to get it as a percentage.

What is the difference between gross margin and contribution margin?

Gross margin takes off product costs only, which is CM1. Contribution margin keeps going and takes off the other costs that rise with each order: shipping, fees and, at CM3, marketing.

What is a good contribution margin for e-commerce?

It depends on what is left to cover. CM3 has to pay your operating expenses before there is any profit, so if operating expenses run at 10% of net revenue, a CM3 under 10% loses money even when every campaign looks profitable.

Is marketing included in contribution margin?

At CM3, yes. CM1 and CM2 come before marketing, which shows what each order can afford to spend on acquisition; CM3 is what is left after it.

Get these numbers from your own store.

Upstack Attribution reports ROAS, MER, new-customer CAC, LTV and CM1 to CM4, reconciled against the revenue in Shopify.

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