401(k) Recordkeeping Break-Even: $86k Monthly Revenue Needed

Fixed costs $65.5K/mo Base monthly spend

Contribution margin 91% After variable costs

Break-even revenue $71.9K/mo Revenue target

Break-even timing Month 31 Model break point

Break-even calculator

Test monthly revenue, variable expenses, and fixed costs against break-even for a 401k recordkeeping service.

Lean Base Full

Monthly revenue Revenue drives the margin available to cover fixed costs. $ Low sales High sales Variable expenses These are direct costs that move with plan activity and revenue. $ Lower costs Higher costs

Money available to cover fixed costs $183,536 $198,417 revenue - $14,881 variable expenses

Margin ratio

93%

Covers fixed costs

Yes

Fixed monthly costs This is the monthly overhead break-even must cover. $ Lean overhead Heavy overhead

Break-even chart Revenue Total costs

Which 401(k) recordkeeping expenses are fixed, and which move with plan volume?

Cost classification

Break-even lands in Month 31, so cost labels need to be tight. Treat payroll and rent as fixed, but let transaction fees and cloud security move with revenue or the model will overstate margin too early.

Expense	Cost	Break-Even Treatment	Common Mistake
CEO payroll	Fixed	Include one full-time role from Month 1 through Month 60 at $185,000 per year.	Tying executive pay to plan count instead of treating it as baseline overhead.
Compliance Director payroll	Semi-fixed	Model one full-time role through the first three years, then two full-time roles in years four and five.	Smoothing the second hire across revenue instead of adding a staffing step.
Customer Support Lead payroll	Semi-variable	Keep the base team fixed, then scale headcount as plan support load rises from one to eight full-time roles.	Leaving support flat while customer count and participant questions grow.
Office Rent	Fixed	Use $5,500 per month from Month 1 through Month 60 in operating break-even.	Dropping rent from break-even because it does not attach to one plan.
Software Subscriptions	Fixed	Use $1,800 per month as a stable platform operating expense.	Classifying core software as variable just because users log in.
Custodial Transaction Fees	Variable	Apply as a revenue-linked charge: 4.0% in the first year, falling to 3.0% in year five.	Using one flat percentage and missing margin improvement at scale.
Cloud Infrastructure and Security	Variable	Apply as a revenue-linked charge: 5.0% in the first year, falling to 3.0% in year five.	Treating cloud security as fixed when usage and data volume rise with plans.

How does break-even change across lean, base, and full scenarios for a 401(k) recordkeeping service?

Scenario table

Lean is still loss-making, base is near the line, and full has a real cushion. The quick math is simple: monthly revenue rises from about $48k to $522k, while variable costs stay between 6% and 9% of sales.

Planning figures are model assumptions, not guarantees; setup fee adoption falls from 40% to 20%, so don’t count it as steady recurring coverage.

Scenario	Monthly Revenue	Variable Costs	Fixed Costs	CM Ratio	Operating Profit	Break-Even Signal
Lean: Year 1 average	$48.2k	$4.3k	$86.2k	91.0%	-$42.4k	Clear monthly shortfall; no cushion yet.
Base: Year 3 average	$198.4k	$14.9k	$184.8k	92.5%	-$1.3k	Month 31 is the model break-even point, so this stays tight.
Full: Year 5 average	$522.4k	$31.3k	$341.2k	94.0%	$149.8k	Strong profit cushion; break-even risk is low.

What breaks the break-even plan for this 401(k) recordkeeping service?

Stress test

Year 3 is the pressure point: base case has only about a $25k monthly cushion. A 10% revenue miss cuts that to about $6k, and a 15% miss or a 10% fixed-cost bump pushes the month into a gap.

Stress Case	Changed Assumption	Break-Even Revenue	Revenue Gap	Risk Signal
Current plan	Year 3 base case at $198k monthly revenue, 7.5% variable expense, and $159k fixed costs.	$172k	$25k cushion	The base case clears break-even, but the buffer is thin.
Revenue shortfall	Monthly revenue falls 10% to about $179k.	$172k	$6k cushion	A small sales miss leaves very little room for error.
Fixed-cost pressure	Fixed overhead rises 10% to about $175k a month.	$189k	$9k cushion	Overhead creep can erase most of the monthly buffer.
Margin pressure	Variable expense rises 3 points to 10.5% of revenue.	$178k	$20k cushion	Higher service cost still leaves a cushion, but it shrinks fast.
Combined pressure	Revenue drops 10%, variable expense rises 3 points, and fixed costs rise 10%.	$194k	$15k gap	That mix pushes the plan into a monthly loss.

Can you prove the 401(k) recordkeeping model clears break-even before you lock in the build and hiring plan?

Founder checklist

Test the recurring fees, CAC, and staffing before you commit to the platform and headcount. If the $250 plan admin fee, $120 participant fee, and $1,200 CAC do not hold, Month 31 break-even slips fast.

1Recurring price$250 / $120

Confirm buyers will pay $250 per plan and $120 per participant each month, since those recurring fees carry the model.

2CAC hold$1.2K

Make sure customer acquisition cost stays near $1,200 before you scale the $150K first-year marketing budget.

3Fixed load$65.5K/mo

Your Year 1 payroll is about $52.9K a month, and fixed overhead adds about $12.6K, so break-even has a heavy monthly floor.

4Margin stack91%

After 4% custodial fees and 5% cloud and security spend, each recurring dollar keeps about 91 cents before fixed costs.

5Team ramp5 FTE

Verify payroll integration, onboarding, participant records, data security, and support can run on the Year 1 team of five full-time roles.

6Launch mix40% / Month 31

Do not underwrite the $1,000 setup fee as core revenue, because only 40% of Year 1 customers take it, and keep cash through Month 31 when break-even arrives.