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Unit economics & SaaS
Contribution margin
Revenue less all variable costs — what each additional sale contributes toward fixed costs and profit.
Owned by: AnalystTest band: Analyst
The formula
Contribution margin = Revenue − Variable costs
In practice
Gross margin subtracts cost of sales; contribution margin also subtracts the variable selling and delivery costs. It is the margin that answers "should we take this order".
The kind of thing the test asks
- Gross margin is 60%. Sales commissions are 10% of revenue and shipping is 5%. Contribution margin is…
More in unit economics & saas
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