Module 5 of 10 14 min
Revenue Models and Costs
Fixed vs. variable costs, and finding your break-even point.
Course lessons
Step 1
The lesson
Fixed costs stay the same no matter how much you sell — equipment, a booth fee, website hosting. Variable costs rise with each sale — materials, packaging, payment fees.
Key term
Contribution per unit
Price − variable cost per unit. It's how much each sale contributes toward covering fixed costs, and then toward profit.
Key term
Break-even point
The number of sales needed to cover fixed costs: fixed costs ÷ contribution per unit. Below it, you lose money; above it, you profit.
Your revenue model is how and when customers pay: one-time purchases, subscriptions, memberships, or a mix. Recurring revenue is more predictable — and makes break-even easier to plan.
Step 2
See it
20 pairs: revenue $240, total costs $400, profit −$160. 43 pairs: revenue $516, total costs $515, profit $1. 80 pairs: revenue $960, total costs $700, profit $260.
| Revenue | Total costs | Profit | |
|---|---|---|---|
| 20 pairs | $240 | $400 | −$160 |
| 43 pairs (break-even) | $516 | $515 | $1 |
| 80 pairs | $960 | $700 | $260 |
Step 3
Real-world example
Marcus finds his break-even
- Fixed costs: $300 a month (a weekend market booth, supplies kit, and a few ads).
- Price: $12. Variable cost: $5. Contribution: $7 per pair.
- Break-even: $300 ÷ $7 ≈ 43 pairs a month.
Every pair after the 43th adds $7 of profit. Marcus also starts a "Clean Club" — $30 a month for 3 cleans — so part of his revenue is locked in before the month starts.
Step 4
Try it: break-even calculator
Start with Marcus's numbers, then change the price. Notice how much a few dollars moves the break-even point.
Your numbers
Costs you pay no matter how much you sell: rent, subscriptions, equipment.
What each sale costs you: materials, packaging, fees.
Results
Units to break even each month
43
That's $516 in sales
Profit per unit (contribution)
$7.00
Contribution margin
58%
of each sale covers fixed costs and profit
Every sale after unit 43 adds about $7.00 of profit.
Educational calculator, not financial advice. Results are hypothetical estimates based on the numbers you enter.
Step 5
Knowledge check
Answer each question, then check your answer to see the explanation. Retake it as many times as you like.
Question 1 of 3
Step 6
Summary
Fixed costs don't change with sales; variable costs do. Contribution per unit is price minus variable cost, and break-even is fixed costs divided by contribution. Revenue models like subscriptions make income more predictable.
Step 7
What you should remember
- Fixed costs stay put; variable costs grow with sales.
- Contribution = price − variable cost.
- Break-even = fixed costs ÷ contribution.
- Recurring revenue makes planning easier.
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