What is contribution margin?

Contribution margin is revenue minus all variable costs per order — COGS, shipping, payment fees, returns, and ad spend. It shows what each order actually contributes toward covering fixed costs and profit.

What's the difference between contribution margin and profit margin?

Contribution margin tells you what each order contributes AFTER variable costs (COGS, shipping, payment fees, returns, ad spend) — but BEFORE fixed costs like rent, salaries, and software. Profit margin includes everything. Contribution margin is the right lens for decisions like 'Can I afford another order?' — every positive contribution dollar helps cover your fixed costs.

Why include ad spend in contribution margin?

Including the average ad cost per order shows what remains after acquiring that order. It is an estimate: ad spend does not rise by the same amount with every sale. We’d compare the figure with actual orders and costs for the same period.

What's a healthy contribution margin percentage?

The calculator’s bands are reference labels, not industry targets. Your contribution needs to cover fixed costs at the volume you expect to sell. We’d check that amount before treating any percentage as healthy. Reference bands used on this page: below 0% is negative, under 20% is thin, 20–35% is healthy and 35%+ is strong. These are calculator labels, not measured industry averages.

My contribution margin is negative. What should I do immediately?

The costs entered exceed the revenue per order. We’d check product costs, shipping, fees, returns, and ad cost per order before committing more budget. Then compare price or cost changes using the same inputs.

How accurate are these calculations?

Our calculators use industry-standard formulas and are designed for directional accuracy. Results depend on the quality of your input data. For precise financial planning, we recommend validating results with your accountant or financial team.

Is this really free? What's the catch?

Yes, completely free with no hidden costs. We offer these tools to help ecommerce brands succeed. We may occasionally share relevant insights via email if you opt in, but the tools remain free forever.

Is my data private and secure?

Your calculations run in your browser, and we don't store the numbers you type unless you choose to send them — by unlocking a benchmark, emailing yourself a report, or contributing an anonymous data point. We do record anonymous usage events, which tool was used rather than what you entered. The AI tools work differently: your store URL and the report or concepts we generate are saved so we can support you and so your share link keeps working. We never access your Shopify admin, your customer data, or any private account information.

Contribution Margin Calculator

Are You Actually Making Money Per Order?

See what each order actually leaves you — after product costs (COGS), shipping, payment fees, returns, and the ad spend that won the order.

Your Per-Order Costs

Revenue Per Order (AOV)

COGS (Cost of Goods Sold)

Shipping & Fulfillment

Payment Fee

Revenue Lost to Returns

Ad Spend Per Order

Per-Order Contribution

Contribution Margin / Order

$24.03

What's left from each order after variable costs — product cost, shipping, fees, returns and ad spend — or 28.3% of the order's value.

What we’d check next

We’d compare this with fixed costs next to see how many orders cover the month.

View chart and context

Contribution Margin ($)

$24.03

Margin %

28.3%

AOV$85.00

− COGS-$30.00

− Shipping-$8.00

− Payment Fee-$2.47

− Return Cost-$8.50

− Ad Spend / Order-$12.00

= Contribution Margin$24.03

Where the order goes

COGS$30.00
Ad Spend / Order$12.00
Return Cost$8.50
Shipping$8.00
Payment Fee$2.47

Values update as you type.

YOUR RESULTS

Your Results

Margin %

28.3%

Of AOV

Total Deductions

$60.97

All variable costs per order

Payment Fee

$2.47

Return Cost

$8.50

At stated return rate

Ad Spend / Order

$12.00

More things we’d check

Each order leaves $24.03 after the variable costs entered. We’d compare that with fixed costs next.

Find the monthly break-even

We’d check shipping, payment fees and returns against actual orders.

We’d compare products separately before putting more ad spend behind them.

FAQ

Frequently asked questions

Common questions about contribution margin and unit economics

GLOSSARY

Learn These Key Metrics

Contribution Margin

The profit earned on each unit sold after deducting all variable costs....

Average Order Value

AOV

The average dollar amount customers spend per order/transaction....

Return Rate

Percentage of orders resulting in returns. Industry averages range from 15-30% f...

Customer Acquisition Cost

CAC

The total cost of acquiring a new paying customer, including all marketing and s...

Landed Cost

Total cost to bring a product to your warehouse, including product cost, shippin...

Browse all glossary terms

RELATED TOOLS

Keep going

Profit Margin Calculator

Layer in fixed costs to see full profitability per sale.

Calculate full profit margin

Break-Even Calculator

Find exactly how many units you need to cover fixed costs.

Find your break-even point

ROAS Calculator

See if your ad spend per order is sustainable at this margin.

Calculate your true ROAS

FOUND YOUR NUMBER

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