COBRA Administration Break-Even Analysis: $68K Monthly Revenue

Fixed costs $63.8K/mo Overhead and payroll

Contribution margin 94% After variable fees

Break-even revenue $67.8K/mo Monthly revenue target

Break-even timing Month 9 Model payback point

Break-even calculator

Test monthly revenue, variable costs, and fixed costs against the point where COBRA admin operations cover overhead.

Lean Base Full

Monthly revenue Revenue sets the pool available to cover variable costs and fixed overhead. $ Slow start Scaled book Variable expenses These are direct costs that rise with revenue, mainly payment processing and cloud hosting. $ Light load Heavy load

Money available to cover fixed costs $51,857 $55,167 revenue - $3,310 variable expenses

Margin ratio

94%

Covers fixed costs

$18,643 short

Fixed monthly costs This is the monthly cost base revenue must beat, including rent, compliance, software, and payroll. $ Lean base Heavy base

Break-even chart Revenue Total costs

Which benefits administration expenses are fixed, and which move with sales?

Cost classification

Break-even is only reliable when fixed overhead is kept separate from revenue-linked fees. In this model, $10,000 per month of fixed overhead sits apart from payment processing at 2.5% and hosting at 3.5% in the first year.

Expense	Cost	Break-Even Treatment	Common Mistake
Office Rent	Fixed	Use $4,500 per month as baseline overhead from Month 1 through Month 60.	Spreading rent as a percent of revenue, which understates early losses.
Professional Liability Insurance	Fixed	Use $1,200 per month as recurring protection overhead.	Leaving it below the break-even line because it does not serve clients directly.
Legal Compliance Updates	Fixed	Use $2,000 per month to cover ongoing regulatory upkeep.	Treating compliance as optional when it is a core operating requirement.
Software Subscriptions	Fixed	Use $1,500 per month for the current planning range.	Modeling all software as usage-based before any tier change is shown.
Payroll for CEO, Compliance Director, Customer Support Lead, Sales Executive, and Full Stack Developer	Semi-fixed	Add salary in staffing steps as full-time employee counts rise by year.	Treating support headcount like a pure variable expense that moves one-for-one with revenue.
Payment Processing Fees	Variable	Apply the revenue-linked rate, starting at 2.5% in the first year and declining to 2.0% by the fifth year.	Putting processing fees in fixed overhead, which overstates contribution margin.
Cloud Infrastructure and Hosting	Variable	Apply the revenue-linked rate, starting at 3.5% in the first year and declining to 3.0% by the fifth year.	Assuming hosting stays flat while client and participant volume grows.
Notice Printing, Postage, and Support Queues	Semi-variable	Use a base operating layer plus added activity when notices, mailings, and support tickets rise.	Modeling all service workload as fixed, which hides pressure from active case volume.

How does break-even change across lean, base, and full COBRA administration models?

Scenario table

Lean is tight, base turns profitable, and full gives the best cushion. What this estimate hides is ramp timing; Year 1 average revenue smooths the early months.

Planning assumptions only; monthly break-even can move with sales timing, collections, and staffing pace.

Scenario	Monthly Revenue	Variable Costs	Fixed Costs	CM Ratio	Operating Profit	Break-Even Signal
Lean launch model	$55,167	$33,100	$63,750	40.0%	-$18,667	Average month stays under water; Month 9 is the first signal.
Base onboarding model	$119,417	$69,262	$80,833	42.0%	$21,083	Positive run rate supports repeatable employer onboarding.
Full scale model	$186,000	$104,160	$111,250	44.0%	$57,417	Widest cushion, if volume holds and staffing stays disciplined.

What breaks the break-even plan if revenue or support costs slip?

Stress test

The plan breaks if revenue ramps slower than expected or support costs rise. First-year average revenue is about $55,167 a month versus about $67,819 to break even, so there’s a $12,652 monthly gap before Month 9 timing risk.

Stress Case	Changed Assumption	Break-Even Revenue	Revenue Gap	Risk Signal
Current plan	No change to revenue, fixed costs, or margin.	$67,819	$12,652 gap	At the first-year run rate, cash stays tight until volume catches up.
Revenue shortfall	First-year revenue runs 10% below plan.	$67,819	$18,169 gap	A slower ramp pushes break-even farther out.
Fixed-cost pressure	Monthly fixed overhead rises 10% to $70,125.	$74,602	$19,435 gap	More payroll or overhead pushes break-even past the current run rate.
Margin pressure	Processing and cloud hosting rise to 60% of revenue.	$159,375	$104,208 gap	A thin margin leaves no room for higher support or billing costs.
Combined pressure	Revenue falls 10%, fixed overhead rises 10%, and processing plus hosting rise to 60%.	$175,313	$125,662 gap	That mix pushes cash needs well beyond the Month 9 plan.

What should you verify before you sign employer contracts and scale COBRA administration?

Founder checklist

Test the notice, billing, and file workflows before you add employers or hire ahead of them. The model reaches break-even in Month 9, but cash still bottoms at $582K in Month 15, so the first job is proving control before any bigger spend.

1Fixed load$10.0K/mo

Know the monthly fixed burn and assign notice ownership before you sign employers, because rent, insurance, legal updates, software, and admin total $10.0K a month even before wages.

2Billing margin6.0% var.

Reconcile one full billing cycle and check the net after the 2.5% payment fee plus 3.5% hosting, because that margin has to cover support and sales.

3Secure files$80K build

Confirm secure file handling before onboarding employers, because the first six months already carry $80K of platform development and record mistakes are hard to unwind.

4Compliance cadence$2.0K/mo

Lock the monthly review rhythm to the $2.0K legal compliance budget, so notice and reporting changes do not pile up and slow the path to break-even.

5Support load1→5 FTE

Prove support can cover the load before you add accounts, because customer support ramps from 1.0 full-time equivalent (FTE) in Year 1 to 5.0 in Year 5.

6Cash buffer$582K/M15

Validate the $850 Year 1 CAC before you raise the $120K marketing budget, and keep at least $582K through Month 15 so the business does not run short before the model turns.