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Break-Even Analysis Tool
Find how many customers you need before the business covers its costs, compare up to three ways of running it, and see how long it takes to earn back what you spend.
This tool also runs as a stage in a playbook, which takes you through several tools in order:
- Validate a business idea Stage 5 of 5: do the numbers work? Start at stage 1
Not following the playbook?
How customers buy
Stage 4 recorded the price per order, so this is set to "Now and then, or once".
Your costs never leave your browser
The scenarios, cost lines and amounts stay on your computer and in your progress file. To write the diagnosis, only each scenario's break-even numbers are sent to our server. How it works
Costs for each scenario
Scenarios are different ways of running the business, each with its own costs: for example, delivering with your own van, or with couriers paid per trip. Add a second scenario to compare them.
Which costs go where?
Variable costs come with each customer or sale: produce, fuel, packaging, spoilage, a courier paid per trip. The total grows with every customer; the cost for each one stays about the same.
Fixed costs are paid whatever happens: rent, a vehicle lease, salaries, your own pay. Wear on equipment you bought (depreciation: its price spread over the years it lasts) can go here as a cost not paid in cash. It can sit alongside the purchase in the upfront spend: break-even counts the wear, and the payback what-if counts the cash once, upfront.
Upfront spend is paid once, to start: equipment, a fit-out, deposits. It doesn't change break-even, but it has to be earned back.
What it takes to break even
Profit at each number of customers
When would the money come back?
Optional. A what-if, not a forecast: try a pace, or a date to earn it back by, and see what changes.
Save your progress
Download your progress file to continue from this point any time, on any computer: choose it under "Coming back?" at the start of the tool. Each new file includes everything so far, including the earlier stages when they are connected, so keep the latest one. Your work stays in this browser only until you close it.
Not saved yet.
Take your results with you
A PDF of each scenario's break-even, the charts, and the diagnosis.
About the tool
Why it exists
Many happy customers can still lose money
A business pays for itself only when what customers pay, minus what serving them costs, covers the costs that come whatever happens. Break-even analysis finds how many customers that takes. The answer matters only next to a second number: how many customers exist, and how many you could sign.
This tool works on its own, and as stage 5 of our playbook for validating a business idea, where the price and the variable cost per customer come from the test in stage 4. Read more about break-even analysis.
The method
How the tool works
Only what you can know. The steps ask for the price, the variable cost, the fixed costs and the upfront spend: numbers from your test, quotes and bills. Guesses, such as how fast customers come or how big the market is, are optional what-ifs on the results.
The formula. Break-even customers = fixed costs ÷ (price − variable cost per customer), rounded up. Price minus variable cost is the contribution margin: what each customer adds towards fixed costs. Every number is for the same period, a week, a month or a year.
Customers who buy now and then, or once. The price and cost are then for one sale, and break-even is the sales needed each period. If you say how often a customer buys, the tool also gives the customers needed in a year.
Up to three scenarios. The same idea can be run in different ways, such as a leased van or couriers paid per trip. Each scenario has its own price, variable cost and fixed costs, up to 20 lines. The tool can add lines people often forget, such as your own pay; it never fills in amounts.
Costs not paid in cash. Tick a line such as the wear on equipment you bought. Break-even counts it, like depreciation in your accounts; cash break-even, shown alongside, leaves it out to show when money stops running out.
Comparing scenarios. The one with the lowest fixed costs usually needs the fewest customers, but earns less on each. The tool shows where two scenarios cross: above that number of customers, the one with the higher margin earns more.
When the money comes back. Give a pace, such as four new customers a month, and the tool finds the month the business covers its costs, the month it has earned back everything spent (the upfront spend plus the early losses), and the most money needed on the way. Or give a month to earn it back by, and it finds the pace needed. It assumes customers stay; if some leave, it takes longer. A rough count of the market checks that break-even doesn't need more customers than exist.
What leaves your computer. The scenarios, cost lines and amounts stay in your browser and your progress file. To write the diagnosis, the page sends our server only each scenario's break-even numbers, and the server keeps nothing.