Fixed costs, price and cost per unit in; the units and sales needed to break even out.
Break-even is one easy division: fixed costs over what each sale leaves after its own cost. The three numbers that go into it are guesses, and a page that lets someone else move them is how you find out which one is wrong. Here a candle maker sends hers to Sam, who checks her thinking, two days before she signs for a market pitch.
Who it's for
Anyone pricing a product or sizing up a small business before the money is spent: a market stall, a food truck, an evening class, a print run. You send it to a partner, an adviser or whoever is lending you the deposit, and ask them to argue with it.
It answers one question for one product at one price. A shop with forty products at different margins needs a spreadsheet, and so does a business whose costs jump when it hires.
What a good one contains
- Your three guesses to begin with. The sample opens on $600 of fixed costs a month, an $18 candle and $6.50 to make one. The answer is already there: 53 candles.
- What's inside each number. Under the cost per candle: wax $2.10, jar and lid $2.40, wick and scent $1.30, label and box $0.70. A reader can't question "$6.50". They can question the jar.
- The answer in units someone can picture. 53 a month is also $954 in sales, and about 14 each Saturday. The last of those tells you whether it's plausible.
- Where one sale's money goes. A bar splits the $18: 36% to make the candle, 64% toward the fixed costs. That 64% is the whole calculation.
- The crossing chart. Sales rise from zero, costs start at $600, and the lines cross at 53.
- Expected sales, as a fourth input. At the 80 candles she hopes to sell, the stall clears $320.
- A plain "no". When the price doesn't cover the unit cost, the page says there is no break-even instead of printing a negative number.
- What's left out. Her own time, a $380 start-up kit, unsold stock, tax and quiet months.
Break-even isn't a wage
The usual mistake is reading break-even as success. At 53 candles the stall has paid its costs and its owner has earned nothing for four Saturdays. If the business has to pay you, put your pay into the fixed costs: add $400 a month to the sample and the answer moves from 53 candles to 87.
Then test the number you trust least. Drop the sample's price from $18 to $16 and break-even goes from 53 to 64. A two-dollar discount costs eleven more sales every month.
How to send it
With a password. Your costs and your margin are on it. Those are for a partner or an adviser to pick apart, and not for the stall next to yours.
Every page you publish gets one link that opens in any browser. You choose who can open it: anyone with the link, anyone with the password, or only the people and company domains you name, who sign in with Google or Microsoft. Change the page later and the link stays the same.
