Free tool

Contribution margin calculator

See what each order actually leaves you after product cost, fulfilment, shipping, returns, payment fees and marketing. Works per order, so multi-unit baskets are counted properly.

Showing an example. Replace the numbers with yours.

The order

Use averages from the last 90 days.

Average selling price per unit ($)

Units per orderAverage basket size.

Average discount (%)Codes, bundles and sale pricing.

Landed cost per unit ($)Product, freight and duty. Work it out.

Getting it to the customer

Per order, as billed by your 3PL and carrier.

Pick and pack per order ($)

Packaging per order ($)Box, mailer, filler, inserts.

Shipping per order ($)What you pay, not what the customer pays.

Payment fee (%)

Payment fee per order ($)

Other variable cost per order ($) (optional)Apps billed per order, gifts.

Returns

Return rate (%)Share of units returned and refunded.

Cost per return ($)Return label plus processing.

Returns you can resell (%)

Acquisition

Leave blank to stop at CM2.

Cost to acquire a new customer ($)

Orders from new customers (%)

CM1, CM2 and CM3

CM1 is net revenue minus landed product cost. CM2 takes off everything it costs to get the order to the customer and deal with the returns: pick and pack, packaging, shipping, return handling and payment fees. CM3 takes off what you spent to acquire the order. CM2 tells you whether the product and operation work. CM3 tells you whether your growth spend does.

How the calculator treats returns

Refunded units come off revenue. Units you can resell come back into stock, so their product cost is recovered; units you cannot resell are written off. The return label and processing cost is charged on top. Payment fees are charged on the full order value, because most processors keep the fee when you refund.

Break-even CAC

If only some of your orders come from new customers, the acquisition cost is spread across all orders. Break-even CAC is the most you can pay for a new customer before the first order stops covering it: CM2 divided by the share of orders from new customers. Paying more than this can still work if customers reorder, but you are then betting on repeat rate.

For the background, read Unit economics and contribution margin.

Frequently asked questions

What is a good contribution margin for a DTC brand?

It varies by category, but many DTC brands aim for CM2 of 40 to 50 percent of net revenue and a positive CM3 on the first order or within a few months of repeat purchases.

Should shipping be included in contribution margin?

Yes. Shipping is a variable cost of every order, so it belongs in CM2. If you charge customers for shipping, include that income in your average selling price.

What is the difference between gross margin and contribution margin?

Gross margin usually only subtracts product cost. Contribution margin also subtracts the variable costs of fulfilling and acquiring each order, which is why it is the better number for pricing and marketing decisions.

Is my data stored?

No. The calculation runs in your browser. Nothing is sent anywhere unless you choose to download the spreadsheet, in which case only your email address and the headline result are sent to us.