Break-Even Point Case Study
Follow the journey of a coffee-cart startup from planning to profitability
1. The Story
Meet Maya, a barista-turned-entrepreneur who wants to open a coffee-cart near a busy university gate. She must decide:
- How many cups must she sell per day to break even?
- What price covers all costs and leaves profit?
- How much cash runway does she need?
2. Base Data
Fixed Costs (per month)
- Rent for cart space: $1,200
- Insurance: $200
- Utilities & Wi-Fi: $150
- Software (POS, accounting): $100
- Total Fixed: $1,650
Variable Costs (per cup)
- Coffee beans: $0.80
- Cup & lid: $0.25
- Milk & syrup: $0.45
- Payment fee: 3 % of price
- Total Variable: $1.50 + 3 % of price
Price Scenarios
| Price ($) | Expected Daily Demand |
|---|---|
| 3.50 | 120 cups |
| 4.00 | 100 cups |
| 4.50 | 80 cups |
3. Break-Even Calculation
Step 1 – Contribution per Cup
Contribution = Price − Variable Cost
Example @ $4.00: 4.00 − (1.50 + 4.00×0.03) ≈ $2.38
Step 2 – Monthly Break-Even Units
BE Cups = Fixed Costs ÷ Contribution
@ $4.00: 1,650 ÷ 2.38 ≈ 693 cups / month
Step 3 – Daily Break-Even
BE Cups / Day = 693 ÷ 30 ≈ 23 cups
4. Decision Matrix
| Price ($) | Contribution ($) | Monthly BE Cups | Daily BE Cups | Expected Daily Demand | Margin of Safety |
|---|---|---|---|---|---|
| 3.50 | 1.90 | 868 | 29 | 120 | 91 cups |
| 4.00 | 2.38 | 693 | 23 | 100 | 77 cups |
| 4.50 | 2.87 | 575 | 19 | 80 | 61 cups |
Chosen: $4.00 – lowest daily BE volume ≤ expected demand.
5. Download the Full Model
Excel & Google Sheets
- Dynamic break-even chart
- Sensitivity tables
- Monthly & daily views
Key Takeaways
- Break-even = 23 cups/day at $4.00
- Margin of safety = 77 cups/day
- Cash runway = 90 days × profit