Canonical definitions for margin analytics, cost attribution, and unit economics terminology used across Bear Billing.
Last updated: December 2025
Customer Margin is revenue minus variable costs attributable to a specific customer. Shows profitability before fixed costs.
Customer Margin = Revenue - Variable CostsIf a customer pays $500/month and their AI infrastructure costs $150/month, their margin is $350 (70%).
Cost-to-Serve is the total variable cost of delivering your product or service to one customer, including API costs, compute, and per-customer overhead.
Cost-to-Serve = (API Costs + Compute + Per-Customer Overhead) / CustomerA customer using 500K tokens/month at $0.03/1K tokens has API cost of $15. Add $5 compute overhead = $20 cost-to-serve.
Usage-Based Billing is a pricing model where charges are based on actual consumption (tokens, API calls, compute time) rather than flat subscription fees.
Charging $0.10 per 1,000 API calls instead of a flat $50/month subscription. Revenue scales with customer usage.
Profit per Customer is the direct revenues and costs associated with a single customer, used to assess business viability.
Profit per Customer = LTV - CAC - Cost-to-ServeCustomer LTV of $2,000, CAC of $500, and lifetime cost-to-serve of $800 = $700 profit per customer.
Margin Health is a qualitative assessment of customer profitability, typically categorized as Healthy (>40% margin), At Risk (20-40%), or Unhealthy (<20%).
A customer with 15% margin is "Unhealthy" and should be repriced or upgraded to a higher tier.
Token Cost Attribution is allocating the cost of LLM API tokens to specific customers based on their actual usage.
Token Cost = Tokens Used × Cost per TokenCustomer uses 1M input tokens at $3/1M and 500K output tokens at $15/1M = $3 + $7.50 = $10.50 total token cost.
Model Economics is the revenue and cost breakdown for a specific AI model (e.g., GPT-4o vs Claude Sonnet), showing margin per model.
Model Margin = Model Revenue - Model CostsGPT-4o generates $10K revenue but costs $4K = 60% margin. Claude Sonnet generates $8K revenue at $2K cost = 75% margin.
Power User Problem is when heavy users on flat-rate pricing consume disproportionate resources, creating negative margins despite appearing profitable.
A $99/month customer using $300/month in API calls has -200% margin. They appear profitable in revenue reports, but the variable cost exceeds revenue.
Revenue Leakage is uncaptured or undercharged revenue due to billing gaps, reconciliation errors, or pricing model misalignment.
Using a flat rate when usage varies substantially between customers means high-usage customers receive value not captured in pricing.
Pricing Scenario is a simulated pricing model applied to historical usage data to project revenue and margin impact before deployment.
Testing a tiered model against current flat-rate shows 15% revenue increase and 20% margin improvement before changing prices.
Use our calculators to apply these definitions to your own data.