Contribution Margin

Revenue minus the cost of goods sold (COGS), expressed as a percentage of revenue. Gross margin indicates how efficiently a company produces its goods or delivers its services and determines how much revenue is available to cover operating expenses and generate profit.

Operating profit (revenue minus cost of goods sold and operating expenses) expressed as a percentage of revenue. Operating margin measures how efficiently a company converts revenue into profit from its core business activities before interest and taxes.

EBITDA expressed as a percentage of revenue, indicating how much operating profit a company generates from each pound of revenue before non-cash charges and financing costs. EBITDA margin is a key benchmark for operational efficiency across industries.

The level of revenue at which total costs equal total income, resulting in neither profit nor loss. For growth businesses, understanding break-even informs decisions about pricing, unit economics, and the capital required to reach profitability.

The computational expense of running a trained AI model to generate predictions or outputs in production. Inference costs directly impact the unit economics of AI-powered products and services, and are a key consideration in pricing, margin analysis, and the financial viability of AI deployments at scale.

The degree to which a company's operating income changes relative to a change in revenue, determined by the proportion of fixed costs to variable costs. Companies with high intangible asset bases often exhibit strong operating leverage because intangible costs (such as software development and R&D) are largely fixed, enabling profits to scale rapidly with revenue.

The total value of a company's or fund's assets minus its liabilities. For investment funds, NAV represents the per-share or per-unit value.

The profit margin that a hypothetical developer would expect to earn for undertaking the creation of an asset, reflecting compensation for development risk, time, and expertise. In intangible asset valuation under the cost approach, developer's profit is added to direct and indirect costs to arrive at the total cost that a market participant would incur.

The Burn Multiple: Why Capital Efficiency Is the New Growth

The burn multiple has replaced growth rate as the metric investors scrutinise most. This guide explains the formula, stage-specific benchmarks, and why every dollar of burn should be creating an intangible asset that compounds in value.

What is Gross Margin and Contribution Margin?

Gross Margin = (Revenue − Cost of Goods Sold) / Revenue. Contribution Margin = (Revenue − Variable Costs) / Revenue. Both measure profitability at different levels of cost allocation.

What is unit economics honesty and why do founders obscure CAC/LTV ratios?

Founders often hide broken unit economics with misleading metrics. Honest presentation: transparent CAC by channel, LTV with conservative churn assumptions, and clear path to >3:1 LTV:CAC.

What are realistic customer acquisition costs and how do you avoid overpromising growth?

CAC varies wildly by channel—£100 for self-serve SaaS to £50,000 for enterprise sales. Honest CAC forecasting avoids channel averaging and accounts for concentration risk.