Finance.

The framework

1. 01

   Sort every cost by behaviour, not by where the accountant filed it.

   Go through last month's P&L line by line and ask one question of each cost: if I sold one more unit tomorrow, would this number rise? Materials, payment processing, shipping, packaging, per-sale commissions and marketplace fees all move with volume — they are variable, wherever they sit in the accounts. Rent, salaries, software and insurance stay flat whether you sell ten or a thousand — they are fixed. The sorting matters because gross margin follows accounting convention, and several genuinely variable costs — payment fees and shipping are the usual culprits — hide below the gross line, where they quietly eat what looks like margin.

2. 02

   Price one unit's contribution in dollars — the percentage comes second.

   Take your selling price and subtract the full variable cost of one unit; the remainder is the contribution, and it should be a dollar figure you can say from memory. The percentage version is useful for comparing products and channels, but decisions run on dollars: fixed costs divided by contribution per unit tells you exactly how many sales you need each month before you earn anything, which turns breakeven from a spreadsheet abstraction into a sentence — 'we need 300 sales a month before a dollar of profit exists'. If you sell services, the unit is an engagement or a billable day and the arithmetic is identical.

3. 03

   Let contribution set the floor under every discount and every channel.

   Discounts come out of contribution, not revenue, which is why they cost so much more than they look: a 20% discount on a product with a 40% contribution margin removes half of what the sale was worth, so you need twice the volume just to stand still. Run the same arithmetic on every channel — the marketplace that takes its cut, the wholesaler who wants half off, the affiliate commission — and rank them by contribution per unit rather than by revenue. Some of your busiest channels may be contributing almost nothing.

4. 04

   Give the remainder its jobs — fixed costs first, profit last.

   Contribution is named precisely: it contributes to a stack of obligations before any of it is yours. Write the stack down — monthly fixed costs, then debt payments, then the profit you intend to keep — and divide each layer by your unit contribution to see how many sales fund it. This is the discipline gross margin never gives you: it converts every cost you add and every price you set into a number of sales, and it makes 'can we afford this hire' a question with an arithmetic answer — the new salary divided by contribution per unit is the extra monthly volume that pays for it.