Cost structure and break-even point

You already know how much you can bring in. The other half of the rule is missing: buy at four. A business does not sink because it has costs, but because it has costs that do not move when sales fall, or because it bought too early something it could have rented. Understanding how each expense behaves is what lets you decide which structure to start with and how much risk to take on.

By the end of the lesson you will be able to separate investment from running expenses, classify your costs as fixed and variable, recognise when economies of scale appear and calculate how many units you have to sell each month so as not to lose money, with your own salary included.

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Now try it with your own numbers. In the simulator, move the sliders for fixed costs, price and unit variable cost until they reflect your project (the simulator asks for fixed costs per year: multiply the monthly ones by twelve), and watch where the revenue line and the total cost line cross. Then change just one piece at a time and see which one shifts the break-even point the most.

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Takeaways

• CAPEX is what you buy to last; OPEX is what it costs to run each month. Until demand is proven, rent rather than buy.
• A cost is fixed or variable depending on how you contract it, not on what it is called.
• Break-even point = fixed costs divided by unit contribution margin.
• Your salary is a fixed cost: if it is not in the calculation, the break-even point is false.