Negative margin is when the value of the service, good, or resource does not complete cover the cost. theoretically, by reducing the cost by $1.2 million it will make the margin positive by $200,000. meaning that since the negative margin or value, is down/negative $1 million, by reducing the cost by $1.2million makes the value of the service, product, or resource cover the cost thus resulting in a slight but still positive margin.