Break-even analysis determines when your revenue covers all costs. There are two types: (1) Monthly break-even — the month when monthly revenue ≥ monthly costs, and (2) Cumulative break-even — when total revenue earned ≥ total costs incurred since inception.
Break-Even Revenue
Break-Even Revenue = Fixed Costs / (1 - Variable Cost %)
Where variable cost % = COGS as % of revenue.
Key Takeaways
- Break-even = Fixed Costs / Contribution Margin.
- Higher gross margin = lower break-even point.
- Monthly vs cumulative break-even are different milestones.
- Track months to break-even — it should be shrinking.