Contribution margin
Revenue minus all variable costs — what each sale contributes to fixed costs.
Last reviewed 12 September 2026
Contribution margin answers a sharper question than gross margin: how much does one more sale add to covering rent, salaries, and software?
Once contribution margin covers your fixed costs, you are at break-even. Everything after that is profit.
Formula
Contribution margin = Revenue − Variable costs
Frequently asked
What is contribution margin?+
Revenue minus all variable costs — what each sale contributes to fixed costs. Contribution margin answers a sharper question than gross margin: how much does one more sale add to covering rent, salaries, and software? Once contribution margin covers your fixed costs, you are at break-even. Everything after that is profit.
How do you calculate contribution margin?+
Contribution margin = Revenue − Variable costs
Why does contribution margin matter for founders?+
Once contribution margin covers your fixed costs, you are at break-even. Everything after that is profit.
Related terms
Gross margin
What is left from revenue after the direct cost of delivering it.
Break-even point
The revenue level where total costs are exactly covered.
Variable costs
Costs that move up and down with sales volume.
Unit economics
Revenue and cost measured per single unit — one customer, one order, one project.
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