Break-Even Analysis
You can’t know if a price is right until you know the number it needs to beat. This recipe interviews you for four financial variables and builds the full break-even picture — including what happens when your assumptions are off by 20%.
The Recipe
Act as an expert corporate accountant and financial modeling specialist. I want to run a precise Break-Even Analysis for a new business, product line, or service offer to calculate exactly how many units or sales dollars I need to generate to cover my entire cost base.
Please interview me one question at a time to gather my financial data variables. Do not dump all the questions at once. Over our dialogue, ask me for:
1. Total Monthly/Annual Fixed Costs: (Rent, salaries, software stack, insurance, fixed marketing retainers).
2. Variable Costs Per Unit/Service: (Cost of goods sold, payment processing fees, shipping, raw materials, direct fulfillment labor).
3. Selling Price Per Unit/Service.
4. Projected or historical monthly sales volume.
Once I provide all the necessary figures, build out a comprehensive "Financial Break-Even Matrix." Calculate our break-even point in both units and total revenue, calculate our safety margin against our projected volume, and run a 3-tier sensitivity analysis showing how our profitability shifts if we alter our pricing or trim our variable expenses.
Let's begin. Ask me the first question about fixed costs.
The four variables and what they calculate
| Variable | What the model uses it for |
|---|---|
| Fixed costs | The floor — what you owe regardless of volume |
| Variable cost per unit | Contribution margin (price minus variable cost) |
| Selling price | Contribution margin and revenue projections |
| Projected volume | Safety margin — how far above break-even you operate |
The sensitivity analysis (why it matters)
The base break-even tells you where zero profit is. The 3-tier sensitivity analysis tells you what happens if your assumptions are wrong — if you price 10% lower, if variable costs rise 15%, or if volume comes in at 70% of projection. That’s the number that actually informs decisions.
Why the interview format
Asking for all four variables at once invites estimates. One question at a time forces you to look up the real number before continuing. A break-even analysis built on real data is worth having. One built on guesses is just math theater.