This math tells you exactly how much to sell


The biggest question when launching a new business is “how much sales do I need to break even?”

BTW I just released a YouTube video doing a deep dive on this topic:

video preview

To answer this "break even" question we need 2 numbers:

1) Variable costs

2) Fixed costs

In our painting business, the variable costs are:

  • 12% materials
  • 42% labor
  • 8% royalty/brand fund
  • 3% credit cards

Total = 65%

Contribution margin = 100 - 64% = 35%

For every $1 of sales, $0.35 contributes to cover fixed costs and ultimately profit.

Let’s say my fixed costs are:

  • $4,000 for loaded manager payroll
  • $4,000 marketing
  • $1,000 for truck expenses
  • $4,000 for insurance, admin & everything else

Total Fixed costs = $14,000 per month

Fixed Costs / Variable Costs = Break-even sales

$14,000 / 35% = $40,000

We need $40,000 of sales to break even

How much are we making at $50,000 in sales?

$50k x 35% = $17.5k - $14k = $3.5k profit

This math works for a single unit and a $45M/year multi-unit business.

Understanding how your fixed & variable costs affect your profitability is critical to building a profitable business.

Watch this YouTube video to learn more

Cheers!

Brian

P.S. Want my help in finding a great franchise? Click here to book a free strategy call with my team.

Brian Beers

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113 Cherry St #92768, Seattle, WA 98104-2205
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