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About

Contribution margin is what finance textbooks love. Net margin is what shareholders actually get. This report quantifies the gap between the two across 19 industries using January 2026 sector data from NYU Stern (Damodaran), 2025 SaaS benchmarks (Benchmarkit), and standard managerial accounting definitions.

The headline finding: the median gap across industries is roughly 22 percentage points, and the median relative leakage is ~75% of contribution margin before a business reaches net income. Contribution margin flatters the economics. Net margin tells you what's left.

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Part I: What's actually being measured

The two metrics live on the same income statement but answer different questions.

Contribution margin = Revenue − Variable Costs. It tells you how much each additional dollar of revenue contributes toward covering fixed costs and eventually producing profit. It's a managerial metric, used internally for pricing, breakeven, and unit economics. It's not a line item on published financials — you have to estimate it.

Net margin = Net Income ÷ Revenue. What's left after everything — variable costs, fixed overhead, D&A, interest, taxes. It's the shareholder metric. It appears directly on the income statement.

The flow from one to the other

Revenue
  − Variable production / service-delivery costs
= Gross margin
  − Variable SG&A (commissions, fulfillment, claims-acquisition)
= Contribution margin
  − Fixed SG&A (overhead, admin, core salesforce)
= EBITDA
  − Depreciation & amortization
= Operating income (EBIT)
  − Interest and non-operating items
= Pretax income
  − Taxes
= Net income
= Net margin

Everything between contribution margin and net margin — fixed overhead, D&A, interest, taxes — is the leakage. That's where industries diverge.