FINANCIAL-LITERACY5 MIN READ
Contribution Margin Before Growth
Calculate why contribution margin must be healthy before scaling a growth channel.
Low CAC is not enough if contribution is lower. Start with one unit Contribution margin equals unit revenue minus variable costs. It is the money available to recover acquisition cost and contribute to fixed costs. Then add payback CAC payback asks how long it takes contribution to recover acquisition spend. A channel can be efficient eventually but still unfundable if the cash return is too slow. Then scale carefully The P&L sees the total effect after many units. Cash flow sees the funding gap while CAC is paid now and contribution returns later.
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