Work the break-even math on a new add-on
Calculate break-even units from fixed cost and contribution margin for a real launch decision.
A premium analytics add-on will sell for $1,200 per account per year. Variable cost to deliver and support each account is estimated at $240. Fixed launch spend is $48,000. Break-even units = fixed cost divided by contribution margin per unit. The novice move is to divide fixed cost by price, which ignores the variable cost consumed by each sale and makes the target look easier than it is. Step 1 Find contribution per unit: $1,200 price - $240 variable cost = $960 contribution margin per account. Contribution, not revenue, is the dollar amount available to cover fixed launch spend. Step…
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