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Contribution Margin

Contribution margin is contribution profit expressed as a percentage of revenue. Formula: Contribution Margin = (Revenue − Variable Costs) ÷ Revenue

Why It Matters

•Allows comparing SKU profitability independent of price level.
•More accurately reflects SKU-level performance than gross margin.
•Helps identify which products generate meaningful financial contribution and which barely cover variable costs.
•Useful for evaluating the economic impact of price changes or fee increases.

Connection to Capital

Higher contribution margin means a larger portion of each sale is available to return capital and fund additional cycles.

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