PLAIN-LANGUAGE DEFINITION
Contribution margin
Contribution is revenue remaining after specified variable costs; its percentage is contribution divided by revenue.
IN PRACTICE
An example
Revenue 60 less variable costs 26 leaves contribution 34, or about 56.7 percent before ads.
What this does not tell you
State whether advertising is included and do not label contribution as net accounting profit.
Use the term precisely
When you use this term in a brief or report, include the relevant source, scope and assumptions. An example explains the concept; it is not a benchmark or a promise of results.