Auditing Firm Break-Even Analysis: About $104K Monthly Revenue

Fixed costs $66.2K/mo Y1 monthly base

Contribution margin 76% After variable spend

Break-even revenue $87.0K/mo Monthly revenue target

Break-even timing Month 6 First coverage month

Break-even calculator

Use this to test monthly revenue, variable expenses, and fixed costs against break-even.

Lean Base Full

Monthly revenue Revenue sets the pool that covers direct costs and fixed overhead. $ Low sales High sales Variable expenses These rise with revenue, like project labor, travel, software, and client support. $ Low costs High costs

Money available to cover fixed costs $254,997 $328,250 revenue - $73,253 variable expenses

Margin ratio

78%

Covers fixed costs

Yes

Fixed monthly costs This is the monthly overhead that contribution margin has to cover. $ Low overhead High overhead

Break-even chart Revenue Total costs

Which audit firm expenses are fixed, and which move with signed engagements?

Cost classification

Break-even gets reliable only when fixed overhead stays separate from engagement-driven spend. One wrong label can make Month 6 break-even look safer than it is.

Expense	Cost	Break-Even Treatment	Common Mistake
Office Rent	Fixed	Include $8,000/month in overhead from Month 1.	Burying lease risk in startup costs only.
Professional Liability Insurance	Fixed	Include $1,500/month from launch month.	Treating required coverage as optional.
Lead CPA / Partner salary	Semi-fixed	Model $15,000/month as committed review capacity.	Ignoring partner review time in delivery capacity.
Senior Auditor payroll	Semi-fixed	Use $18,333/month in the first year, then scale in hiring blocks.	Calling all audit labor fixed overhead.
Junior Auditor payroll	Semi-fixed	Use $11,667/month in the first year and tie hiring to utilization.	Overhiring before the signed pipeline supports it.
Software Licensing for Client Projects	Variable	Deduct 8.0% of revenue from engagement revenue in the first year.	Classifying project tools as rent-like overhead.
External Specialist Consultation	Variable	Deduct 5.0% of revenue by engagement in the first year.	Hiding subcontracted review inside fixed payroll.
General IT and security plus maintenance	Fixed	Include $5,500/month in overhead for infrastructure and platform maintenance.	Leaving security spend outside break-even overhead.

How does break-even change across lean, base, and full audit firm setups?

Scenario table

Break-even moves with fixed payroll and rent. The lean case trims the hurdle, the base case sits near the core threshold, and the full build needs more revenue but adds delivery capacity.

Planning figures only; actual break-even will move with pricing, staffing mix, and client mix.

Scenario	Monthly Revenue	Variable Costs	Fixed Costs	CM Ratio	Operating Profit	Break-Even Signal
Lean case: rent-delayed start	$93.0k	$22.3k	$70.7k	76.0%	$0	Delaying rent lowers the hurdle, but the firm still needs steady utilization.
Base case: Year 1 core mix	$103.5k	$24.8k	$78.7k	76.0%	$0	This is the core threshold, at about 11 weighted client bundles a month.
Full case: Year 2 scaled team	$154.9k	$34.6k	$120.3k	77.7%	$0	More staffing raises the hurdle, but it also improves delivery capacity and margin stability.

What pressures the audit firm's break-even plan?

Stress test

The plan is close to break-even at about $1.035M revenue, with roughly $787k of fixed costs and 24% variable costs. A 10% revenue miss, higher overhead, or variable costs rising to 29% can turn it negative fast.

Stress Case	Changed Assumption	Break-Even Revenue	Revenue Gap	Risk Signal
Current plan	No change in revenue, fixed costs, or variable costs.	$1.035M	$0 cushion	Near break-even, so one weak month hurts.
Revenue shortfall	Revenue lands 10% below plan.	$1.035M	$79k gap	A modest miss erases the cushion.
Fixed-cost increase	Fixed overhead rises 10%.	$1.139M	$104k gap	Rent, insurance, or staffing creep pushes break-even up.
Margin pressure	Variable costs rise from 24% to 29% of revenue.	$1.108M	$73k gap	More subcontracted review or lower fees squeeze margin.
Combined pressure	Revenue falls 10%, fixed overhead rises 10%, and variable costs rise to 29%.	$1.220M	$204k gap	Delayed engagements plus fee pressure can push the firm well past break-even.

Can this audit firm prove break-even before it signs the lease and hires the team?

Founder checklist

Not yet. The firm should only lock in overhead if it can prove enough pipeline, a workable pricing mix, and cash to survive the Month 6 low point. Break-even lands in Month 6, but the model still needs $539K at the bottom, so funding comes first.

1Pipeline depth$1.035M/mo

Verify booked and late-stage work can reach the monthly revenue run rate before you add more fixed overhead.

2Fixed load$17K/mo

Verify rent, insurance, and base office costs stay near this level, and challenge the $8K lease if remote delivery still works.

3Pricing mix$7.2K-$11K / 76% CM

Verify Year 1 pricing holds at $7,200, $11,000, $3,400, and $2,400 so the 76% contribution margin stays intact.

4Capacity ramp6 FTE

Verify the current 6 FTE team can handle quality-control review before the Month 13 hires, because adding people too early only lifts fixed cost.

5Cash reserve$539K min

Verify cash stays above the Month 6 low point, since that is the model's minimum reserve and the main failure point.

6Launch capital$500K launch

Verify you can fund the $350K build plus the $150K Year 1 marketing plan before launch, because break-even will not pay for that spend upfront.