Sustainability
Know Your Break-Even Point Before Seeking Capital.
Commercial sustainability begins with understanding how sales contribute toward operating obligations.
Three Essential Measurements
Contribution Per Sale
Selling Price − Variable Costs
Break-Even Sales Volume
Fixed Operating Expenses ÷ Contribution Per Sale
Cash Sustainability
The ability to meet financial obligations when due, using available cash and expected collections.
Example
- Average selling price
- 5,000
- Variable cost per sale
- 4,000
- Contribution per sale
- 1,000
- Monthly fixed expenses
- 300,000
Break-even requirement
300 sales per month, or approximately 10 sales per day over 30 days.
This calculation establishes an operating break-even target, not a guarantee of positive cash flow. Actual sustainability also depends on inventory payments, collection delays, debt obligations, taxes, and other cash requirements.