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Definition

What is Contribution Profit?

Revenue minus all variable costs — what each sale contributes toward fixed costs and profit.

Contribution profit (contribution dollars) is the per-unit or aggregate amount left after every cost that scales with sales: COGS, shipping, packaging, payment fees, and variable marketing. It is the number ad spend must be measured against — a campaign judged on revenue or gross profit can look healthy while contribution after ads is negative. Fixed costs are then covered out of total contribution.

Formula

Contribution Profit = Revenue − Variable Costs (COGS + shipping + fees + variable marketing)

Example

A $90 order with $32 COGS, $9 shipping, $3 fees, and $18 ad cost contributes $28 toward fixed costs and profit.

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Related terms

  • Contribution Margin — Revenue minus variable costs — the amount each unit contributes toward fixed costs and profit.
  • Gross Margin — Revenue minus cost of goods sold, expressed as a percentage of revenue.
  • Break-Even ROAS — The minimum return on ad spend needed to cover the cost of running an ad campaign.