Glossary > Contribution Margin Ratio (CMR)

Contribution Margin Ratio (CMR)

Contribution Margin Ratio (CMR) is a financial metric that measures the profitability of a product or service by determining the proportion of revenue that contributes to covering fixed costs and generating profits. It is particularly relevant for Software as a Service (SaaS) companies, where understanding the profitability of individual customers or subscriptions is essential.

The CMR is calculated using the following formula:

CMR = (Revenue – Variable Costs) / Revenue

In the SaaS industry, revenue refers to the total revenue generated from customer subscriptions or usage fees. Variable costs include expenses directly associated with providing the service, such as hosting fees, customer support costs, data storage costs, and any other costs that increase or decrease with the number of users or subscribers.

The CMR indicates the percentage of each dollar of revenue that remains after deducting the variable costs directly associated with delivering the SaaS service. It represents the contribution of each customer or subscription toward covering fixed costs and generating profits. A higher CMR suggests greater profitability and a higher capacity to cover fixed expenses.

Understanding the CMR can help SaaS companies evaluate the financial viability of their business model, assess the profitability of different customer segments, make pricing decisions, and determine resource allocation. It provides insights into the contribution of each customer or subscription to the overall financial health of the business and helps identify areas for improvement or optimization.

Explore SaaS Topics

Explore XaaS Topics

Discover and learn all about SaaS, XaaS, and the Cloud.

Glossary Terms


Your go-to resource to break down the key terms you need to know about XaaS.

Ready to learn more about CloudBlue?

CloudBlue is a powerful XaaS platform that will help you grow revenue. Here are some resources for more information:

Subscription and Billing Management

Subscription and Billing Management

Our flexible subscription and billing solution can handle the most complex XaaS business models – and scale recurring revenue.

Partner and Channel Management

Partner and Channel Management

Cut through complexity and see more revenue from your channel business as you easily onboard and enable resellers across the globe – at scale.

Vendor and Product Information Management

Vendor and Product Information Management

Centralize all of your vendor and supplier contracts and streamlined product information on one platform.

Ready to
get started?

Sign up or talk with a CloudBlue
expert today to get started.

CloudBlue, an Ingram Micro Business uses Cookies to improve the usability of our site. By continuing to use this site and/or log-in you are accepting the use of these cookies. For more information, visit our Privacy Policy