05/19/2026
Your agency loves to talk about ROAS.
Here's the number they're not talking about.
Contribution margin is the clearest picture of whether your ad spend is actually building a healthy business - and most Shopify founders aren't tracking it.
Here's how to calculate yours:
Revenue
− Cost of goods
− Shipping & fulfillment
− Transaction fees
− Ad spend
= Your contribution margin
That's the real cash your business generated. Not a platform metric. Not a vanity number. Actual money.
And here's where it gets even more useful.
Break it into two numbers:
Total contribution margin - how the whole business is performing.
New customer contribution margin - what it actually costs to acquire someone who's never bought from you before.
If your new customer CM is negative, you're betting the entire business on LTV that may never materialize.
ROAS is easy to make look good. Contribution margin is harder to spin.
Which is exactly why you should be asking for it.
→ Save this formula. Pull it out next time your agency sends you a ROAS report.
→ Follow for more on what profitable paid media actually looks like.
🎥 Full breakdown in the video above.
Want a framework for calculating this for your own brand? Checkout the free calculator on my website. It will help you decode these metrics for your business - link in bio.