Question 1

How do I calculate break-even revenue?

Accepted Answer

Break-even revenue = Fixed Costs ÷ Contribution Margin Ratio. Contribution Margin Ratio = (Price − Variable Cost) ÷ Price. This is the minimum monthly revenue to cover all fixed costs.

Question 2

What is a good contribution margin for a small business?

Accepted Answer

Service businesses typically target 50–70%+ contribution margin ratios. Product businesses often range 30–50%. Below 30% makes it very difficult to cover fixed costs without high volume.

Question 3

What is the margin of safety?

Accepted Answer

Margin of safety is how much current revenue exceeds the break-even point, expressed as a percentage. A 20%+ margin is generally considered healthy for small businesses.

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