What the result shows
The contribution margin per order and as a share of the price, what a month of orders contributes, and the orders needed to cover fixed costs.
Contribution Margin Calculator for Ecommerce
See what each order leaves after product, shipping, fee and ad costs, and how many orders cover your fixed costs.
Find what each order really adds
Use an average order. Include every cost that rises with each sale, including the ad spend it takes to win one order.
Contribution margin per order
$27.20
Each order leaves $27.20, 34.0% of the order value. At 1,000 orders a month that is $27,200, or $12,200 after fixed costs.
- Contribution margin ratio
- 34.0%
- Monthly contribution
- $27,200
- Orders needed to cover fixed costs
- 552
- Profit after fixed costs
- $12,200
Know what each order adds before you scale it.
How it is calculated
Subtract product cost, shipping and fulfilment, payment and platform fees, and ad spend per order from the order value. Divide fixed costs by that amount for the orders needed to break even.
How to use it
Raise prices, cut a variable cost or lower ad spend per order when the margin is thin. Scaling orders with a thin contribution margin adds work faster than it adds profit.
Worked example
An order sells for $80. The product costs $28, shipping and fulfilment cost $9, payment and platform fees of 3.5% take $2.80 and ads cost $13 per order. That leaves a contribution margin of $27.20, or 34.0% of the order value. At 1,000 orders a month, the store earns $27,200 toward $15,000 of fixed costs, so it needs 552 orders to break even and keeps $12,200 after fixed costs.
What this result leaves out
Costs are averages per order and held steady. Returns, discounts, tax, and changes in ad efficiency as spend grows are not included.
Before you use the result
What is contribution margin?
Contribution margin is what a sale leaves after the costs that rise with each order: product cost, shipping, payment fees and the ad spend to win the order. That amount pays for fixed costs such as salaries, software and rent, and whatever remains is profit.
What is the contribution margin formula?
Contribution margin is the selling price minus variable costs. The contribution margin ratio divides that amount by the selling price. An $80 order with $52.80 of variable costs has a $27.20 contribution margin and a 34.0% ratio.
How is contribution margin different from gross margin?
Gross margin subtracts only the cost of the product. Contribution margin also subtracts shipping, fees and ad spend, so it shows what each order really adds. A product with a healthy gross margin can still have a thin contribution margin once ads are paid for.
How do I use contribution margin to find break-even sales?
Divide monthly fixed costs by the contribution margin per order. $15,000 of fixed costs divided by $27.20 per order is 552 orders a month, rounded up. Each order beyond that adds its full contribution margin to profit.
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