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Compare shares of sales dollars, not just unit counts
Contribution here is sales less the variable costs included for that line. The contribution percentage divides that amount by sales. In the example, the fixed-cost budget is separate and already includes the specified management and overhead; it is not deducted from each line first.
The SBA’s break-even tool explains fixed costs divided by contribution and identifies a single-product foundation. The weighted comparison below is an original ELN planning example, with the sales-dollar mix made explicit.
Begin with the unit contribution for each line
Fictional annual model, in U.S. dollars: Product A sells for US$1,000 with US$600 of included variable cost; Product B sells for US$500 with US$400 of included variable cost. Their contribution percentages are 40% and 20% respectively. The chosen annual fixed-cost budget is US$210,000.
| Planned share of sales dollars | Weighted contribution | Sales needed to cover US$210,000 |
|---|---|---|
| 75% A and 25% B | 0.75 × 40% + 0.25 × 20% = 35% | US$600,000 |
| 25% A and 75% B | 0.25 × 40% + 0.75 × 20% = 25% | US$840,000 |
More lower-contribution sales can raise the target
US$210,000 divided by 35% gives US$600,000. At the weaker mix, dividing by 25% gives US$840,000. The extra US$240,000 is a consequence of these assumptions, not a demand forecast. It does not mean the team can sell the extra amount or deliver it with the same staff.
Do not substitute unit shares for revenue shares in that formula. Product A has twice Product B’s price, so a 50/50 split of units would not be a 50/50 split of sales dollars. Choose one consistent basis before weighting.
Show the owner which mix is actually supported
Ask management for customer/order evidence by line, the variable costs included, and any staffing or equipment step that changes the fixed budget. Test the case in which lower-contribution work arrives first. Unknown costs should remain unknown.
Use separate annual unit-economics scenarios for the proposed mixes and retain this product-level table beside them. Opening costs, finance, tax and cash collection still need their own checks. Covering the selected fixed-cost budget is narrower than proving overall profitability or launch funding.
Scope
- All prices, costs, mix shares and fixed costs are fictional. The calculation assumes the stated contribution rates and fixed budget remain valid; it is not a full accounting, capacity, tax or funding conclusion.
Next step
Prepare at least two supported annual sales mixes, reconcile their revenue and cost totals, then compare them in U.S. unit economics without treating the target as evidence of demand.
Sources & review notes
U.S. Small Business Administration
Passage, dates and research notes
official-guidance · Break-even point; single-product formula; contribution margin
Read the formula and inputs. Exclude financing-viability claims, the suggested 10% reserve and the erroneous quarterly-to-monthly sentence.
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