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Amanat Prakash

Building xces • 1m

Day 4 Business Terms Contribution Margin – The Profit Clue Most Businesses Ignore Most founders talk about revenue and profit… but ignore what really drives profitability: Contribution Margin. What is it? Contribution Margin = Revenue – Variable Costs per unit It tells you how much money you make from each unit sold—after covering just the variable costs (like materials, delivery, packaging). Why it matters: Shows how much is left to cover fixed costs like salaries, rent, or marketing. High contribution margin = better control over scaling and pricing. Vital for pricing decisions, discounts, and growth planning. Example: You sell a product for ₹500. Variable cost = ₹300. Contribution Margin = ₹200 If your fixed costs are ₹2,00,000/month, you need to sell 1,000 units to break even. Pro Tip: Focus on improving your contribution margin before chasing growth—or you might scale losses instead of profits.

0 replies1 like

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