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Get startedContribution margin
What each sale contributes after the costs that scale with volume.
Contribution margin is revenue minus all variable costs — COGS, shipping, fees, discounts, returns and ads — expressed as a value or a percentage. It's what's left to cover fixed costs and profit. More honest than gross margin because it includes the costs that actually scale with each order.
Formula
Contribution margin = (Revenue − variable costs) ÷ Revenue × 100
Example: $100,000 − $71,900 variable costs = $28,100 (28.1%).
What a good result depends on
It should comfortably cover your fixed costs at your sales volume.
Common mistakes
- Treating fixed costs (rent, salaries) as variable.
- Reading a healthy gross margin as a healthy contribution margin.