Calculate your gross margin, contribution margin, and profit per order. Factor in COGS, shipping, transaction fees, and ad spend — with breakeven analysis built in.
Your average Shopify order value or product price
Product manufacturing or wholesale cost as % of revenue
Average shipping cost you pay per order (not what customer pays)
Shopify Payments, Stripe, or PayPal fees (typically 2.9% + $0.30)
Optional: Meta/Google Ads, influencer costs, or blended CAC
Shopify plan, apps, team salaries, warehouse rent, etc.
What this means: Your gross margin is $60.00 (60.0%) after product costs. After shipping and transaction fees, your contribution margin is $49.00 (49.0%). After ad spend, your net profit per order is $34.00 (34.0%). You can spend up to $49.00 to acquire a customer and still break even on the first purchase.
Revenue minus product costs (COGS). This is the starting point — how much you keep after paying your supplier or manufacturer. A healthy gross margin gives you room to cover operating expenses and invest in growth.
Revenue minus all variable costs — COGS, shipping, and transaction fees. This is what each order contributes toward covering your fixed costs and generating profit. The contribution margin formula: (Revenue - Variable Costs) / Revenue.
What's left after subtracting marketing and ad spend from your contribution margin. This is your true per-order profit when you factor in customer acquisition costs from Meta, Google, or other paid channels.
How many orders per month you need to cover fixed costs — Shopify plan, apps, warehouse rent, team salaries. Divide your monthly fixed costs by your contribution margin per order to find the breakeven threshold.
Your Shopify dashboard shows revenue, but that's not profit. Gross margin, contribution margin, and net margin each tell a different part of the story. Seeing all three layers reveals what each sale actually earns after product costs, operating expenses, and ad spend.
A $10 price increase on a $100 product doesn't just add $10 profit — it flows straight to gross margin and cascades through contribution and net margins. Since COGS and shipping stay the same, small price changes have outsized impact on your bottom line.
Your contribution margin sets the ceiling for customer acquisition cost. If it's $40, you can spend up to $40 on Meta or Google Ads and still break even on the first order. Your net margin shows what you actually keep after ad spend — the number that determines real profitability.
Some products might show a healthy gross margin but turn negative once shipping and transaction fees eat into the contribution margin. More traffic and conversions just mean more losses. Use all three margin types to find which SKUs need repricing or removal.
Before adding a new SKU, run it through all three margin calculations. Check gross margin against your category benchmark, verify contribution margin covers variable costs, and ensure net margin leaves room for profit after ad spend. If margins are too thin, adjust pricing or negotiate with suppliers before launching.
Combine with our Discount Margin Calculator before Black Friday or site-wide sales. If your contribution margin is $40 and you offer 25% off, your new CM drops to $15 — meaning you need 2.7x the volume to maintain the same profit. Check how discounts affect all margin layers before committing.
Your contribution margin sets the ceiling for profitable customer acquisition. With a $50 CM, spending $60 on Facebook/Instagram ads per customer means every sale loses $10. Use the net margin result to set realistic CAC targets and ROAS benchmarks for paid campaigns.
Different channels have different fee structures that affect every margin layer. Amazon FBA might have 30% total fees vs. 3% on your Shopify store. Calculate gross margin, contribution margin, and breakeven for each channel to determine where to focus inventory and ad spend.
See exactly how COGS changes ripple through your profit margins. Reducing COGS from 45% to 40% on a $100 product adds $5 to gross margin and contribution margin per sale. At 1,000 orders/month, that's $5,000 extra to reinvest in ads or hit breakeven faster.
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