Every sale contributes something towards covering fixed costs — and eventually profit. Understanding contribution is the key that unlocks break-even.
£4.00 (selling price)
−
£1.00 (variable cost)
=
£3.00 contribution
Where does the money go?
Every time you sell something, the revenue splits into two parts. Only one of them is contribution.
Every £4.00 sale splits like this:
Variable Cost £1.00
Contribution £3.00
Variable Cost
£1.00
Goes to suppliers / materials
Contribution
£3.00
Towards fixed costs & profit
Selling Price
£4.00
Total revenue per unit
Important: Contribution is NOT profit. It's what's left after variable costs — but you still need to cover your fixed costs before you make any profit. Contribution helps you do that.
The Upsell: Why "Large?" Matters
From today's session — when you upgrade a coffee from regular to large, the extra revenue is small but the extra contribution is huge. That's why every coffee shop always asks.
Regular Coffee
£4.00
Variable cost: £1.00 Contribution: £3.00
→
Large Coffee
£5.00
Variable cost: £1.25 Contribution: £3.75
The customer pays £1 more. The extra materials cost 25p. The extra contribution is 75p. That's why McDonald's crew member of the year was won by saying "What, that one?" and pointing at the large — 75% of the upsell goes straight to contribution.
Practice: Any Product
Type in any selling price and variable cost — the contribution calculates instantly.