# Contribution margin

> Revenue less the variable costs of making the sale: product cost, payment fees, fulfilment and returns, and, depending on where the finance team draws the line, the marketing spent to win the order.

Source: https://barkingcat.ai/terms-of-trade/contribution-margin/

## Terms of Trade · Edition 1: The PE deck

Definition

Revenue less the variable costs of making the sale: product cost, payment fees, fulfilment and returns, and, depending on where the finance team draws the line, the marketing spent to win the order. What remains is the contribution the sale makes towards fixed costs and profit. Finance teams define it before or after marketing; Barking Cat’s reads take it after marketing, and the board pack should state which it uses. It is the first ecommerce number a finance director trusts and the last one a growth deck shows.

Field note

Contribution margin is the two-word phrase a CFO uses to terrify marketers. It is the number that turns a record month into a loss, because it is the only one that remembers the free delivery, the discount code and the dresses that came back.

Board question

What is the contribution margin per order on the ecommerce channel this quarter, and which line item moved it?

Applied through

[The Review](https://barkingcat.ai/review/) measures against margin alongside traffic, conversion, order value and repeat; the [Commercial Diligence](https://barkingcat.ai/investors/ecommerce-commercial-diligence/) read marks every growth assumption against it.

Related terms
- [Cost to serve](https://barkingcat.ai/terms-of-trade/cost-to-serve/)
- [Returns rate](https://barkingcat.ai/terms-of-trade/returns-rate/)
- [ROAS](https://barkingcat.ai/terms-of-trade/roas/)
- [Average order value](https://barkingcat.ai/terms-of-trade/average-order-value/)

## Contact

steve@barkingcat.ai

Barking Cat Advisory Limited. Registered in England and Wales, company number 17338003.