How to calculate your SaaS break-even point

Break-even is the point where monthly revenue covers monthly costs, so you stop burning cash. For a subscription business the useful question is: how many paying customers do I need? Here's how to work it out with one made-up example.

The example

A small SaaS charges $50 a month. Hosting, payment fees and support cost about $10 per customer per month. Fixed costs (salaries, tools, rent) are $6,000 a month.

The formula

First, find what each customer contributes after their own costs:

Contribution per customer = price − variable cost per customer. $50 − $10 = $40 a month. That's an 80% gross margin.

Then divide fixed costs by it:

Break-even customers = fixed costs ÷ contribution per customer. $6,000 ÷ $40 = 150 customers.

In revenue terms that's 150 × $50 = $7,500 MRR. Another way to get there: fixed costs ÷ gross margin, so $6,000 ÷ 0.8 = $7,500.

Don't forget churn

Reaching 150 customers once isn't the same as staying there. At 4% monthly churn you lose about 6 of those 150 customers every month (150 × 0.04), so you need at least 6 new customers a month just to stay at break-even. More on that: how to calculate churn.

What about acquisition costs?

If you spend a steady amount on marketing every month, add it to fixed costs. Say you spend $1,200 a month on ads: break-even becomes ($6,000 + $1,200) ÷ $40 = 180 customers. To check whether each customer pays back what it cost to win them, see CAC payback.

How long until you get there?

Say you have 60 customers today and add a net 10 a month after churn. You need 90 more, so about 9 months. Your cash needs to last at least that long, plus a buffer. Check that with burn rate and runway or the free runway calculator.

Ways to move the break-even point

• Raise prices. At $60 with the same costs, contribution is $50 and break-even drops to 120 customers.
• Cut variable costs per customer, like cheaper hosting or fewer support hours.
• Cut fixed costs. Every $400 less a month means 10 fewer customers needed in this example.
• Reduce churn, so fewer new customers go to replacing lost ones.

Every formula in one place: SaaS metrics formulas.

Want the full model?

The Founder Unit Economics Pack ($39) is an Excel and Google Sheets workbook that works out break-even customers, a 12-month MRR projection, LTV:CAC, payback and runway, with side-by-side scenarios.