Formula
Revenue needed = (fixed costs + desired profit) ÷ contribution margin
The contribution margin is what is left of each sale after variable costs (goods, card fees, commissions, taxes on sales), as a percentage of the price.
Example
To earn $10,000 a month with $20,000 of fixed costs and a 40% contribution margin, the business needs $75,000 of sales a month. With an average sale of $150, that is 500 sales, or about 19.2 a day over 26 days. With zero profit, the break-even is $50,000.
For break-even in units, see the break-even calculator.
Frequently asked questions
How do I find my contribution margin?
Take the price, subtract all the costs that grow with each sale, and divide by the price. Selling at $100 with $60 of variable costs gives 40%.
Should fixed costs include my salary?
Yes, include the owner’s pay in fixed costs, or add it to the profit goal.
What if the target looks too high?
Raise the margin (price or costs), cut fixed costs or set a smaller profit goal, and test the numbers again.
See also
Results are estimates for information only and are not financial, legal or medical advice. Rates, taxes and fees vary — confirm with a professional or your lender.