Contribution margin calculator
What each order really leaves you, and how much of that you can spend winning the customer.
≈ 3 minutes
Work out my contribution margin
The minimum price you can sell at
Pricing is not adding a percentage to cost. Fees take a share of the price, not of the cost, so the price has to be solved for. This calculator gives you two figures: the break-even price, below which you lose money, and the target price, the one you need to keep the margin you want.
Every calculation runs in your browser. The figures you type are never sent to a server and are never stored.
Your results will appear here
Enter the unit costs and the margin you want to keep.
- Product cost plus pick, pack and shipping costs
- Percentage fee and flat channel fee
- Target margin on the selling price
Calculation results
Target price
—
The price that gives you the margin you want.
Break-even price—Below this you lose money
Cash costs—Excluding the percentage fee
Profit per unit—At the target price
Markup on costs—
Difference from your price—
Percentage difference—
See the breakdown
| Cash costs | — |
| Break-even price | — |
| Target price | — |
| Profit per unit | — |
| Current price | — |
| Difference | — |
Recommended next step
You have the price you need. The first campaign always arrives: work out how much you can discount before dropping below the margin you just protected.
Work out my maximum discountResults are estimates based on the information you enter. Fees, taxes and platform terms can change: always check the figure that matters to you against your invoice or the official platform. They do not replace your real invoices, your official accounts or professional tax, financial or legal advice.
What this tool works out
This minimum profitable price calculator returns two prices that answer different questions.
The break-even price is the absolute floor: it covers variable costs and the fee exactly, and leaves zero. Selling below it is paying to sell.
The target price additionally leaves the margin you decided to keep. That is the one to use as your list price; the break-even one only tells you how much room you have in a clearance.
Why price is solved for, not added up
The temptation is to add: cost plus margin. It does not work when percentage fees are involved, because those fees are charged on the final price, which is exactly what you do not know yet.
Add 25 % margin to $19.85 of cost and you get $24.81. But if the channel takes 12 % of that price, it keeps $2.98 and your real margin falls well below the 25 % you intended.
That is why it has to be solved. The fee and the target margin are both percentages of the price, so they group into a denominator and the cost is divided by it. That division is the difference between a price that works and one that looks like it works.
How the formula works
The flat fee is added to costs, because it is an amount. The percentage one goes into the denominator, because it depends on the price.
monetary costs = product + packaging + pick and pack
+ shipping + other + flat fee
break-even price = monetary costs / (1 - fee %/100)
target price = monetary costs
/ (1 - fee %/100 - target margin %/100)
profit per unit = target price x (1 - fee %/100)
- monetary costs
markup = profit per unit / monetary costs x 100
If the fee plus the target margin reach 100 %, the denominator vanishes and no price exists that meets the target. The calculator warns instead of returning a meaningless figure.
A worked example
A product with $12 of cost, $1.20 of packaging, $2.50 of pick and pack, $3 of absorbed shipping and $0.80 of other costs. The channel charges 12 % plus $0.35 flat. A 25 % margin on the selling price is wanted, and today it sells at $29.
| Item | Value |
|---|---|
| Monetary costs per unit | $19.85 |
| Channel fee | 12.00% |
| Break-even price | $22.56 |
| Target margin | 25.00% |
| Target price | $31.51 USD |
| Profit per unit | $7.88 |
| Equivalent markup | 39.68% |
| Difference against your current price | -$2.51 |
Monetary costs add up to $19.85. The break-even price is $22.56, and the target price $31.51. At $29 the product is profitable, but it sits $2.51 below target: almost 8 % short of what the intended margin needs.
Margin and markup are not the same
Margin measures profit as a percentage of the selling price. Markup measures it as a percentage of cost. Same money, different base: since cost is smaller than price, whenever profit and cost are both positive the markup comes out larger than the margin.
The calculator shows the equivalent markup because many trades negotiate in those terms, especially with suppliers. But the target margin you enter is always read against the selling price: put a markup there and you will get a lower price than you need.
How to read the result
The difference against your current price is the actionable figure. If it is negative, you are selling below your target: not necessarily losing money, but earning less than you decided to earn.
It helps to read both references together. Above break-even and below target means the product contributes, just less than you intended. Below break-even is something else: every sale subtracts.
And one warning no formula can give you: a profitable price is not a price the market will accept. This calculator says what you need to charge; what you can charge is decided by your customers and your competitors.
What to decide next
With the target price set, the usual question arrives with the first campaign: how much can I discount without dropping below the margin I have just protected. It has an exact answer, and it is worth knowing before announcing anything.
What this assumes
- Target margin is expressed on the selling price, not on cost
- The percentage fee applies to the final selling price
- The costs entered are variable per unit
- Prices are expressed without indirect taxes
- The shipping you enter is the shipping you absorb
What it does not cover
- Whether the market will accept the price you need
- Your competitors' prices
- Fixed costs, which are covered by accumulated margin
- Discounts, promotions or tiered pricing
- The effect of price on sales volume
Frequently asked questions
Why can I not just add the margin to the cost?
Because the channel fee is charged on the final price, not on the cost. Add 25 % to $19.85 and you get $24.81, but the channel takes 12 % of that price and your real margin lands well below 25 %. That is why the price is solved for.
What is the difference between break-even price and target price?
Break-even covers costs and fees and leaves zero: it is the floor. Target adds the margin you want to keep and is what belongs on your list. Break-even only tells you how far you could go in a clearance.
Where does the flat transaction fee go?
In its own field. It is added to monetary costs because it is an amount that does not change with price, while the percentage fee goes into the denominator because it does. Mixing them gives the wrong price.
Is the target margin on price or on cost?
On the selling price. If you usually think in markup, convert first: a 50 % markup equals a 33.3 % margin. The calculator shows the equivalent markup so you can check the conversion.
What happens if the target margin is impossible?
It happens when the fee plus the margin reach 100 %: nothing is left of the price to pay for the product. No price, however high, meets the target. The way out is lowering the margin you ask for or selling through a cheaper channel.
Do I include acquisition cost in the costs?
You can, if you want a price that also covers advertising. Bear in mind the target price will be higher and you are asking each unit to pay for its own acquisition, which is demanding but prudent for products without repeat purchase.
Is this the price I should set?
It is the price your target needs, not necessarily the one the market will accept. If the target price sits far above your competitors, the problem is not the calculation but your cost structure or the product's positioning.
What should I work out after this?
How much you can discount without dropping below the margin you just set. The first campaign always arrives, and it helps to have the floor calculated before announcing a percentage.
Official sources
Shopify — break-even analysis and contribution marginhttps://www.shopify.com/blog/break-even-analysis
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