Financial
Contribution Margin CM1, CM2, and CM3 formulas (e-commerce unit economics)
Build an illustrative per-order contribution waterfall from net revenue through product, fulfillment, payment and advertising costs.
Define the costs included at each contribution level
CM1, CM2 and CM3 labels vary by business. Here CM1 subtracts landed product cost, CM2 also subtracts fulfillment and a modeled payment fee, and CM3 additionally subtracts advertising acquisition cost.
The 2.9% plus 0.30 fee is an illustrative assumption, not a current Stripe quote. Actual fees, charged amounts, taxes, refunds and currencies may change the result.
The combined discount/return percentage is a simplified reduction in revenue; real returned orders can have unrecovered costs and fees. Treat all inputs as amounts per comparable order cohort.
CM2 is the zero-contribution CPA threshold only for the included first-order costs. It does not establish company break-even or justify an advertising bid when other costs, lifetime value or attribution differ.
| Per-Order Waterfall ($100 AOV, 10% Disc/Ret) | Formula | Dollar / Order |
|---|---|---|
| Net Order Revenue | =$100 * (1 - 0.10) | $90.00 |
| CM1 (Product Margin after $28 COGS) | =$90.00 - $28.00 | $62.00 (68.9% of Net) |
| CM2 (After $9.50 Ship & $2.91 Gateway) | =$62 - $9.50 - ($90*2.9%+$0.30) | $49.59 (Break-Even CPA!) |
| CM3 (After $30.00 Paid Ad CPA) | =$49.59 - $30.00 | $19.59 (21.77% Net CM3) |
CM2 (Break-Even CPA) and CM3 per-order contribution formulas
Uses LET so NetRev, GatewayFee, and CM2 are computed cleanly in a single cell.
=LET(net, A2 * (1 - B2), fee, ROUND(net * 0.029 + 0.3, 2), contributionBeforeAds, net - C2 - D2 - fee, ROUND(contributionBeforeAds - E2, 2))Maximum Break-Even Paid CPA per order (equals CM2)
Returns the modeled contribution before advertising. A CPA below this amount leaves positive contribution only under the stated assumptions.
=LET(net, A2 * (1 - B2), fee, ROUND(net * 0.029 + 0.3, 2), ROUND(net - C2 - D2 - fee, 2))Try the example
Use the original values or change them to test your understanding.