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    Business Fundamentals

    Topic 08 of 12 · Start here: what a finance function does

    Margins, Breakeven & Cash

    The numbers that tell you if you make money on what you sell, when you'll break even, and whether you'll survive.

    The 6 decisions this topic covers

    1. Charging a price, or building a model?Monetisation is the whole way you make money from what you offer — the model, the streams, the structure.
    2. Does each sale actually make money?Contribution margin is what's left from a sale after you subtract the variable costs of making that sale.
    3. Margins work differently in each modelHow do I calculate contribution margin for my business?
    4. Which breakeven do you actually mean?Breakeven is the point where you're neither making nor losing money.
    5. Where does your D2C margin leak?CM1, CM2 and CM3 are just contribution margin measured at three “levels,” peeling away more costs at each step.
    6. Can you see the crunch coming?Cashflow is the real movement of money in and out of your business.

    The questions, answered

    MonetisationCharging a price, or building a model?Monetisation is the whole way you make money from what you offer — the model, the streams, the structure. Pricing is just one piece of it: the actual number you charge. Monetisation is the strategy; pricing is one lever inside it.Contribution marginDoes each sale actually make money?Contribution margin is what's left from a sale after you subtract the variable costs of making that sale. It tells you how much each sale “contributes” toward covering your fixed costs and, eventually, profit. It's the single clearest signal of whether your business can work.BreakevenWhich breakeven do you actually mean?Breakeven is the point where you're neither making nor losing money. There are different “levels” of it — operational breakeven (your core operations cover their costs) and EBITDA breakeven (you're profitable before interest, tax and non-cash costs) — and they tell you different things about how close you are to standing on your own.CM1 CM2 CM3Where does your D2C margin leak?CM1, CM2 and CM3 are just contribution margin measured at three “levels,” peeling away more costs at each step. They're mainly a D2C thing because D2C has a stack of costs — product, fulfilment, marketing — that founders need to see separately to know where the money leaks.Cash forecastingCan you see the crunch coming?Cashflow is the real movement of money in and out of your business. A cashflow forecast is your best estimate of that movement over the coming months, so you can see crunches before they hit. You build it by listing expected cash in, expected cash out, and tracking what's left each month.

    Who answers these

    The guide is written by the people who do this work for founders every week.