Contribution margin
Contribution margin definition for SaaS and AI founders: what it means, how to calculate it, and common pitfalls when reading it in dashboards.
Contribution margin is revenue minus every cost that varies with sales — COGS plus variable selling costs such as commissions or per-transaction fees not already in COGS.
Formula
Contribution margin = Revenue − Variable costs
In practice
Useful per customer or per plan; in V1 MarginMeter reports gross margin, with customer-level economics coming later.
Related terms
Related
- ARPAAverage MRR per paying customer.
- ARRAnnualized recurring revenue: MRR multiplied by twelve.
- CACSales and marketing spend per new customer.
- ChurnCustomers or recurring revenue lost in a period.
- COGSThe direct cost of delivering your product to existing customers.
- Expansion MRRMRR added by existing customers through upgrades or more seats.
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