Lesson 3 of 6
Break-even — how many sales do you actually need?
Learning objectives
- Separate fixed and variable costs
- Calculate contribution profit per order
- Know your monthly break-even order count
- Set a realistic monthly target
Fixed vs variable
Fixed costs: software, rent, freelancers, subscriptions, insurance, storage. They happen whether you sell or not.
Variable costs: product cost, packaging, fulfilment, transaction fees, ad spend per sale. They scale with orders.
The break-even formula
Contribution profit per order = price − variable cost per order. Break-even orders = monthly fixed costs ÷ contribution profit per order.
Example: £1,000 monthly fixed costs and £20 contribution profit per order means 50 break-even orders per month. If you currently sell 20, you are subsidising the business out of pocket.
Founder insight — Derrick Twum
Most coaches launching products never run this calculation until cash gets tight. By then they're solving the wrong problem.
Key takeaway
If you don't know your break-even order count, you don't know if you're running a business or a hobby.
Reflection questions
- 1What are your real monthly fixed costs?
- 2What is your contribution profit per order?
- 3How far are you from break-even?
Action task
Calculate your monthly fixed costs, contribution profit per order, and break-even orders. Write the gap.
Worksheet
Work through these prompts. Answers save to this device.
Answers are saved to this device only. Cloud sync coming soon.