Contractor field notes
Find the revenue needed to cover contractor business costs
Break-even revenue is the point where revenue covers fixed expenses and the variable costs associated with that revenue, without leaving profit. Use it to understand the minimum sales level your current cost structure requires.
Contribution-margin break-even formula
Contribution margin = 1 − variable cost percentage ÷ 100. Annual break-even revenue = annual fixed costs ÷ contribution margin. Monthly break-even revenue = annual break-even revenue ÷ 12.
Worked example
If annual fixed costs are $180,000 and variable costs consume 60% of revenue, the contribution margin is 40%. Annual break-even revenue is $180,000 ÷ 0.40 = $450,000, or $37,500 per month. At that revenue, variable costs are $270,000 and fixed costs are $180,000, leaving $0 profit.
Common estimating pitfalls
- A variable-cost rate of 100% or more cannot cover positive fixed costs.
- Break-even is not a profit target or a guarantee that cash arrives on time.
Frequently asked questions
What is a fixed cost versus a variable cost?
Fixed costs are budgeted expenses that do not change directly with sales in this model. Variable costs are represented as a share of revenue. Classify each expense once to avoid double counting.
Does break-even include owner pay?
Only if you include owner compensation in the fixed-cost budget. The calculator does not add it automatically.
What if my projects have different margins?
Use a realistic weighted variable-cost percentage for your expected work mix, and test less favorable assumptions as well.