Profitability planning
Profitability planning shows whether and when your business will make a profit. The key figure is the break-even point – the point at which income covers costs.
Understand contribution margin
The contribution margin is revenue minus variable costs per unit. It shows how much each sale contributes to covering fixed costs. The higher it is, the faster you reach profitability.
Calculate the break-even point
You reach break-even when your total contribution margins cover your fixed costs. To calculate it, divide your fixed costs by the contribution margin per unit – the result is the quantity you need to sell to avoid a loss.
Levers for higher profitability
You improve profitability through three levers: higher prices, lower variable costs or lower fixed costs. Even small changes shift the break-even point significantly.
Frequently asked questions
What is the break-even point?
The point at which revenue and costs are equal – from which you make a profit. It is calculated as fixed costs divided by the contribution margin per unit.
How quickly should I reach break-even?
That depends on the business model. What matters is that your cash reserve lasts until break-even – otherwise you’ll need additional financing.
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