# Break-even point: how to calculate it for an online business, month by month

> The break-even point is the volume where contribution covers fixed costs. The formula, a monthly worked example and the margin of safety.

- Source: https://productovi.com/blog/break-even-point
- By: Sergey Bruh
- Published: 2026-10-01
- Topics: Break-even and margin of safety, Contribution margin, Fixed, variable and step costs

The **break-even point** is the number of units (lessons, orders, subscriber-months) whose contribution margin exactly covers your total fixed costs for a period. Formula: break-even volume = total fixed costs ÷ contribution margin per unit, rounded up. Below that number the period loses money; above it, every extra unit adds its contribution margin to profit. For an online business the useful version is monthly, not yearly: a profitable year can hide several months below the line. Below are the formula, a worked example on an online tutoring school, and the two numbers that belong next to it: margin of safety and operating leverage.

## The formula

$$
Q_{BE} = \frac{F}{c}, \qquad c = \frac{S - V}{Q}
$$

where $F$ is the period's **total** fixed costs, $c$ the contribution margin per unit, $S$ sales, $V$ variable costs and $Q$ units sold.

- **Contribution margin per unit**, not the price. It is the price minus the costs that come with each unit, see [contribution margin explained](/blog/contribution-margin).
- **Total fixed costs**: everything that doesn't grow with one more unit this month, including the marketing budget you set and step costs at their current level, see [fixed vs variable costs](/blog/fixed-vs-variable-costs).

For a subscription the unit is a subscriber-month: monthly price minus per-subscriber costs (payment fee, usage-based hosting, support that scales with customers). Break-even subscribers = fixed costs ÷ that number.

## A worked example: an online tutoring school

Klasna is an online tutoring school: families buy packages of 1:1 video lessons, and tutors are paid for each lesson delivered. Its year, September to August, closed with an operating profit of 744,174.72 UAH. The CEO's conclusion: summer doesn't matter. Let's check month by month.

**March.** Families paid 4,868,640 UAH for 7,840 lessons. Variable costs: tutor payouts 3,136,000 + payment fees 121,716 + video and AI 243,040 = 3,500,756 UAH. That leaves a contribution of 1,367,884 UAH, or 174.48 UAH per lesson. Fixed costs: support coordinators 114,000 + team salaries 540,000 + office and tools 84,000 + marketing 300,000 = 1,038,000 UAH.

$$
Q_{BE} = \frac{1\,038\,000}{174.48} = 5\,949.1 \rightarrow 5\,950 \text{ lessons}
$$

Round up: there is no such thing as part of a lesson. The same steps for two more months:

| UAH                     | March     | May       | July     |
| ----------------------- | --------- | --------- | -------- |
| Fixed costs             | 1,038,000 | 1,096,000 | 850,000  |
| Contribution per lesson | 174.48    | 175.40    | 176.35   |
| Break-even, lessons     | 5,950     | 6,249     | 4,820    |
| Lessons delivered       | 7,840     | 9,620     | 2,600    |
| Operating profit        | 329,884   | 591,348   | −391,490 |

July has the lowest line of the three (two coordinators instead of four, 150,000 UAH of marketing), yet it delivered only 2,600 lessons, just over half of its break-even point. Its contribution of 458,510 UAH against 850,000 of fixed costs is a loss of 391,490 UAH.

Five months sit below their line: September, December, June, July and August, losing 1,029,144.15 UAH together. A strong spring covers it. With 20% fewer lessons from February to May, the same summer would wipe out the year's profit.

## Margin of safety: how far from the line

The [margin of safety](/glossary/fin-margin-of-safety) shows how far sales can fall before you reach break-even, as a share of actual volume:

$$
MoS = \frac{Q - Q_{BE}}{Q} = \frac{7\,840 - 5\,950}{7\,840} = 24.11\%
$$

March could lose almost a quarter of its lessons and still cover every fixed cost. May, the exam peak, had 35.04%. July had none: it was 2,220 lessons short.

![In March, 174.48 UAH of contribution per lesson covers 1,038,000 UAH of fixed costs at 5,950 lessons; 7,840 lessons leave a 24.11% margin of safety and 329,884 UAH of profit](/blog/break-even-point/diagram.png)

## Operating leverage: why profit moves faster than sales

[Operating leverage](/glossary/fin-operating-leverage) is contribution ÷ operating profit. For March: 1,367,884 ÷ 329,884 = 4.15. With 10% more lessons, contribution grows by about 136,788 UAH while fixed costs stay put, so profit grows by about 41%. Ten percent fewer lessons cut it by the same 41%. Leverage is roughly 1 ÷ margin of safety (1 ÷ 0.2411 ≈ 4.15): the closer a month is to break-even, the harder its profit swings.

## Break-even analysis: what moves the break-even point

Only two things: total fixed costs and contribution per unit. Selling more doesn't move the line; it moves you along it.

- **A fixed-cost decision has a price in units.** Add 20,000 UAH of ads in March and break-even goes from 5,950 to 6,064 lessons (1,058,000 ÷ 174.48 = 6,063.8, rounded up).
- **A discount lowers contribution per unit**, so the same fixed costs need more units.
- **Step costs jump.** Klasna adds a support coordinator (38,000 UAH a month) for every started 400 active learners. A fourth one in March would add about 218 lessons to the line (38,000 ÷ 174.48 ≈ 217.8).

## Honest limits

- **One average contribution per unit.** March mixes subjects and package sizes. If customers shift to cheaper packages, contribution per lesson falls and the line rises.
- **Fixed only within a range.** Double the customers and you need more support people, maybe more of the team.
- **Profit, not cash.** Prepaid packages bring money before lessons happen; break-even says nothing about the bank balance.

## Key takeaways

- Break-even volume = total fixed costs ÷ contribution margin per unit, rounded up.
- Calculate it per month: a yearly profit can hide months below the line.
- Report margin of safety and operating leverage next to it.
- Every fixed-cost decision and every discount has a price in units per month.

## FAQ

### What is the break-even point formula?

Total fixed costs for the period divided by contribution margin per unit (price minus variable costs per unit), rounded up to a whole unit.

### How do I calculate break-even for a subscription business?

Use a subscriber-month as the unit: monthly price minus per-subscriber variable costs. Divide monthly fixed costs by that number to get the subscribers you need.

### What is the difference between the break-even point and the margin of safety?

The break-even point is the line; the margin of safety is how far your actual volume sits above it, as a percentage.

## Learn it hands-on

The lesson [Break-even and margin of safety](/courses/finance-for-product/break-even/theory) works through Klasna's twelve months with the full dataset and numeric exercises checked instantly. It is part of the course _Finance for Product People: From Unit Economics to Business Cases_, which starts with [what one lesson leaves](/courses/finance-for-product/contribution-margin/theory).

## Related lessons

- [Break-even point in units and margin of safety](https://productovi.com/courses/finance-for-product/break-even.md)
- [Contribution margin per unit: what one lesson leaves](https://productovi.com/courses/finance-for-product/contribution-margin.md)
- [Cost behavior: fixed, variable and step costs](https://productovi.com/courses/finance-for-product/fixed-variable-and-step-costs.md)
- [Case: should Klasna launch group lessons?](https://productovi.com/courses/finance-for-product/group-lessons-case.md)