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The Key to Staying Profitable? Track Contribution Margin Daily

March 25, 2025

Summary

Contribution margin is one of the most overlooked yet critical metrics in e-commerce. Drew Fallon explains why tracking it daily is essential for profitable growth and why breaking even on contribution can be the key to success.

Transcript

I think one of the healthiest things that came out of the downturn and this idea of like tracking your contribution margin. There was this whole debate for two years, basically about what even is that? I think that was a really healthy question for folks. I think it's fairly intuitive to understand. The contribution margin in general is a fairly obscure management accounting idea.But because our businesses in e-commerce, we have such high variable cost structures, I kind of got forced to the forefront. So I think daily contribution margin tracking and this is probably a little bit biased to the Irish side, but it's paramount. I mean, fixed expenses are fixed and variable is variable. And so just like aggregate contribution margin is almost like still the Northstar KPI, I think even in the era of growth, because it kind of comes back like you want to grow.You don't want to be burning contribution. Essentially, if you can break even on contribution, if you have any semblance of repeat in your business, you're going to be in and out. Okay. So.

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