How the numbers work
Break-even
The revenue at which you stop losing money.
At break-even, revenue exactly covers all costs. Below it you make a loss; above it, a profit.
Foundation uses your fixed and variable costs:
break-even revenue = fixed costs ÷ (1 − variable costs ÷ revenue)
The part in brackets is your contribution margin: the share of each sale left after variable costs. Every sale contributes that much towards fixed costs.
Foundation works this out at your full-year run rate, so a slow first year doesn't distort it. It also shows break-even as a number of sales, using your average price.
Reading it
- Compare break-even with your capacity. If you need to run at 80% of capacity just to cover costs, there's little room for a slow month.
- Moving costs from fixed to variable lowers break-even. So does a higher price, if volume holds up.
- The fixed and variable split on Cost Structure matters here. Check it reflects how your costs really behave.