If you don't know your contribution margin, you're flying blind. And unfortunately, most of the clients I work with don't even know what contribution margin is, let alone have an accurate number for it.

This episode walks you through why contribution margin is so crucial, why it's a much better metric than gross margin for DTC founders, how to calculate it, and mistakes to avoid when doing so.

Timestamps:

0:00 - Gross margin vs. Contribution margin

4:15 - Every variable cost you're probably missing

9:30 - The 14% margin story

14:00 - How pricing actually moves profit

20:45 - Promotions, discounts, and where the money actually goes

27:00 - How to run your own contribution margin audit

Output 2: Episode Notes (Markdown)

If you don't know your contribution margin, you're flying blind. And unfortunately, most of the clients I work with don't even know what contribution margin is, let alone have an accurate number for it.

This episode walks you through why contribution margin is so crucial, why it's a much better metric than gross margin for DTC founders, how to calculate it, and mistakes to avoid when doing so.

In This Episode:

• Why gross margin is the wrong number to run your business on, and what to track instead

• The variable costs most founders forget to include, and where the biggest gaps tend to hide

• How a 10% difference in contribution margin typically produces a 40-60% difference in net profit

• The 62% stat that should make every DTC founder stop and check their SKUs

• Why a 1% price increase can generate roughly 8% more profit on average

• The real math behind discounts and promotions, and why most founders are bleeding profit while celebrating revenue

• How to run a contribution margin audit by product and by channel

Timestamps

0:00 - Gross margin vs. Contribution margin

4:15 - Every variable cost you're probably missing

9:30 - The 14% margin story

14:00 - How pricing actually moves profit

20:45 - Promotions, discounts, and where the money actually goes

27:00 - How to run your own contribution margin audit

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