Revenue is a start. Know what you actually keep.

Contribution margin is revenue left after variable costs. It helps you judge whether selling one more order contributes toward overhead and profit.

Separate variable and fixed costs

Product costs, order packaging, payment fees and seller-paid delivery commonly vary with orders. Rent and a flat monthly software subscription usually do not. If you allocate fixed expenses per order, label that allocation so you do not double-count it later.

Calculate it on net revenue

A $100 order discounted by $10 generates $90 net revenue. If the product, shipping and payment costs total $50, the pre-ad contribution margin is $40, or 44.44%. A $20 acquisition cost leaves $20 contribution profit before fixed overhead. Pass-through sales tax is not business revenue.

Account for returns without double counting

Expected return cost equals return probability multiplied by the unrecovered loss per returned order. Include refunds, unrecovered shipping and lost inventory consistently with your net-revenue definition. Do not subtract a refunded amount twice if revenue was already reduced for those refunds.

Use margin to make decisions

A higher selling price can increase margin but reduce conversion. Cheaper shipping can reduce costs but affect customer experience. Model one change at a time, then compare against actual order outcomes. Contribution margin is a decision tool, not a substitute for your financial statements.