Contribution Margin Calculator
What is Contribution Margin?
Contribution margin is the difference between your net revenue and the costs that vary directly with generating that revenue – first by subtracting Cost of Goods Sold (COGS) to get Gross Profit, then subtracting Variable Selling Costs.
Who Uses It and How?
CFOs, CMOs, digital marketing directors, product managers, and financial analysts use this metric to determine how much revenue is left to cover fixed costs and contribute to profit. It helps in key decision-making such as product launches, media budget allocation, pricing strategies, supplier negotiations, and reverse logistics policies.
A baseline Contribution Margin (CM) ratio of at least 30% is typically recommended. If your ratio is lower, it might be time to re-evaluate your cost structure or pricing strategy.
Use this tool to calculate your contribution margin.
Decision-Making Insights
Use your calculated contribution margin to guide key decisions. Whether you're considering a new product launch, expanding to a new channel or country, negotiating with suppliers, adjusting media budgets, or refining your pricing strategy—the contribution margin is a critical indicator of financial sustainability. Aim for a CM ratio of at least 30% as a baseline.