❓ Why Should I care?

Tracking Net Contribution Margin is the base of profitable scaling.

Scaling without clarity on Net Contribution Margin is a recipe for disaster, as you could overspend on ads and wipe out your margins.

Many brands fixate on revenue or ROAS alone, but revenue ≠ profit.

Even if you are focused on scaling to get market share with an investor funding, it is smart to track how much money you are bleeding to predict future outcomes of getting back to profit.

🎯 What’s the Goal here?

Your goal is to establish a clear profit baseline for each sale and use it to guide ad spend decisions. This means calculating:

1. Your Net Contribution Margin per order or even product
2. Determining the maximum cost-per-acquisition (CPA), or new customer CPA (nCPA)
3. Minimum return needed to at least break even on each sale.

🛠️ How can I practically do that?

1. Step - Calculate Net Contribution Margin

Start at the shop level to understand your overall health — then zoom into platforms to identify where margin is created or destroyed.

Ideally, you should do this for both:

1. Shop-level reporting
2. Platform (Google Ads) level reporting (❗attribution applies).

Formula

$$ NetContributionMargin = Gross Revenue - Returns - Discounts - VAT - COGS - Fulfilment Costs - Shipping - Marketing Spend $$

Shop-Level Net Contribution Margin

A shop-level Net Contribution Margin helps you understand the overall health and margins of your eCom store as a whole, regardless of traffic source.

• What you’ll need:

Google Ads Net Contribution Margin - Platform Level

You can also estimate Net Contribution Margin for Google Ads campaigns, either by: