For a D2C brand, EBITDA is roughly profit after marketing minus fixed operating costs such as salaries, rent, software and agency retainers. It is the number investors and lenders use to compare operating performance.
Contribution tells you whether each order pays its way; EBITDA tells you whether the business as a whole does. A brand can have a positive CM3 and negative EBITDA if it has not yet reached the volume to cover its fixed costs.
Formula
EBITDA = Profit after marketing − Fixed operating costs
Example
Profit after marketing of ₹6,00,000 a month and fixed costs of ₹4,50,000 give EBITDA of ₹1,50,000.
CM1, CM2, CM3 and EBITDA per order and per month, with RTO, COD, channel comparison and a board-ready report.
Related terms
- CM1, CM2 and CM3CM1, CM2 and CM3 are three layers of contribution margin: after product cost…
- Fixed and variable costsVariable costs rise with every order, such as product cost, shipping and fees…
- Break-even pointThe break-even point is the sales volume at which total contribution exactly…
Part of the growth marketing glossary by Shiva Sharma.