Contribution margin: what it is

Contribution margin is the amount each procedure "contributes" toward paying the clinic's bills after covering its own variable costs. In simple terms: the price charged minus everything that particular appointment cost to happen. What is left pays for rent, fixed staff, the accountant, marketing and, finally, generates profit.

Which costs go into the calculation?

Variable costs are those that only exist when the procedure happens:

• disposable supplies (needles, cannulas, gauze, gloves, anesthetic);
• the injectable product used on that patient;
• card terminal fee and installment cost;
• taxes charged on the sale, depending on the clinic's tax regime;
• the professional's commission, when there is one.

Rent, the front desk's fixed salary and the software subscription are fixed costs and stay out of the contribution margin. They come in later, when the total of margins is compared with the total of fixed costs.

How do you calculate it, with an example?

Hypothetical example: a procedure is charged at R$ 1,000.00. The variable costs (product, disposables, card fee and tax) add up to R$ 400.00. The contribution margin is R$ 600.00. As a percentage of the price, that is 60%. These numbers are only illustrative and do not represent a market price.

Notice that two procedures with the same price can have very different margins, if one uses a more expensive product. And a cheap procedure can be advantageous if it uses little chair time, which ties the topic to the clinic hour.

How does it guide decisions?

The margin helps answer practical questions:

• Which procedure deserves to be offered more?
• How much discount can I give without losing money?
• How many appointments do I need per month to cover fixed costs?
• Is it worth offering many installments, given the cost of installments?

It relates to markup, which starts from the cost and arrives at the price; the contribution margin looks from the price backward. It also connects with idle capacity: if the schedule has empty slots, selling a procedure with a positive margin may be better than not selling, although recurring discounts train the patient to wait for promotions.

In Harmy

The app's PDF quote calculates the value per ml of each area, with discount, validity and notes, using the price per ml saved in My clinic. The app does not calculate margin or cost; the value per ml is the price charged. The margin analysis is done by the clinic, with its own costs.

Also called: unit contribution margin, marginal contribution.