Contribution margin is revenue from a product or service minus its variable costs, the amount left over to cover fixed costs and generate profit, expressed either as a dollar amount or a percentage of revenue.
Unlike gross margin, which subtracts all cost of goods sold, contribution margin isolates specifically the costs that scale directly with volume (materials, per-transaction fees, sales commissions) from fixed costs that don't change much with volume (salaries, rent, software subscriptions).
It's a useful number for decisions gross margin doesn't answer well, like whether it's worth taking on one more customer or one more unit of volume at a given price. A business can have healthy gross margins overall while still losing money on a specific low-volume product line once its true contribution margin is isolated.
Add your revenue and website for a full diligence brief, reviewed by a CPA who ran EY's West Coast R&D Tax Credit practice for 13 years.