Contribution Margin
Also: Contribution Profit
Revenue left after all variable costs of a product or customer, showing what each contributes toward fixed costs and profit.
Why it matters
Contribution margin goes a step beyond gross margin by accounting for all variable costs, giving a clearer view of what a product or customer truly contributes. It helps decide which products, segments, or customers are actually profitable to serve. It informs pricing and where to focus.
What good looks like
A positive and healthy contribution margin per customer means each one helps cover fixed costs and move toward profit. Negative contribution margin means you lose money on every customer served, which growth only makes worse.
Related terms
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