Contribution Margin

Measured as

Contribution margin = revenue - variable costs

Misused when

• Mixing fixed and variable costs inconsistently.
• Ignoring variable costs like payment fees, returns, or shipping when they matter.

Operator takeaway

• Use contribution margin when setting break-even ROAS/CPA targets (profitability depends on variable costs).
• Separate variable costs from fixed costs (rent, base salaries) to avoid double counting.
• Tie Contribution Margin to the same balance-sheet date, scenario, and decision memo you are using elsewhere in the model.
• Document which claims, costs, or adjustments your team includes before comparing numbers across forecasts, covenants, or valuation work.

Next decision

• Quantify the impact with Paid Ads Funnel Calculator if you need to turn the definition into an operating assumption.
• Read Paid ads funnel: CPM, CTR, CVR -> CPC, CPA, ROAS (with profit) if the decision depends on interpretation, policy, or trade-offs beyond the raw formula.