Definition
The break-even point is where total revenue equals total costs. Below it you lose money each month; above it you make a profit.
Formula (subscription businesses)
- Contribution per customer = price − cost to serve one customer
- Break-even customers = fixed monthly costs ÷ contribution per customer (round up)
- Break-even MRR = break-even customers × price
Example
Fixed costs are $12,000 a month. You charge $49 a month and each customer costs $6 a month to serve.
- Contribution: $49 − $6 = $43
- Break-even customers: $12,000 ÷ $43 ≈ 279.1, so 280 customers
- Break-even MRR: 280 × $49 = $13,720
Why prices move break-even so much
A price rise goes straight to contribution. Raising the price to $59 lifts contribution to $53 and cuts break-even to 227 customers, about 19% fewer.
Break-even vs default alive
Break-even tells you the target. Whether you reach it before the cash runs out depends on growth and burn. See default alive.
Common mistakes
- Treating costs that grow with customers (support, hosting) as fixed.
- Forgetting payment fees in the cost to serve.
- Ignoring churn: you need to keep 280 customers, not just sign them.