Contribution margin is the percentage of revenue left over after subtracting all variable costs, before you account for fixed costs like salaries or rent. It shows how much cash each additional sale contributes toward covering your fixed costs and eventually generating profit. For marketplaces and e-commerce businesses, contribution margin per order is the equivalent of gross margin for a SaaS company: it is the core unit economics number investors ask about first.
By Pitchkit · Last Updated October 10, 2026
Contribution margin tells investors whether your unit economics work before you even discuss scale. If each transaction loses money after variable costs, more growth just means more losses, no matter how good your top-line trend looks.
It is also the number that determines how much room you have to invest in acquiring new customers or subsidizing one side of a marketplace.
Subtract all variable costs, costs that scale directly with each unit sold, from revenue, then divide by revenue. Variable costs typically include cost of goods sold, payment processing fees, shipping, fulfillment, and any variable sales commission.
An order generates $100 in revenue. Variable costs, including cost of goods, payment processing, and shipping, total $30. Contribution margin equals (100 minus 30) divided by 100, or 70 percent.
SaaS businesses typically run 60 to 80 percent contribution margin. Marketplaces, after payment processing and customer support costs, often run 40 to 70 percent. E-commerce businesses, after cost of goods, shipping, and returns, commonly run 20 to 50 percent. What matters most is that the number is positive and large enough to cover your fixed costs at the growth rate you are targeting.
Treating fixed headcount costs as if they were variable, which inflates the reported margin. Leaving out third-party API costs or software fees that scale with usage. Forgetting payment processing fees, which quietly eat several points of margin on every transaction.
On your financials slide, show both gross margin and contribution margin so investors see the full picture, and connect the number directly to your payback period math. Example line: a contribution margin of 70 percent at scale, after APIs and payment processing.
Turn your metrics into a pitch narrative investors can follow.
Start Free