Disaster Recovery Service Break-Even: About $120K/Month

Fixed costs $27.0K/mo monthly overhead base

Contribution margin 71% after variable costs

Break-even revenue $38.3K/mo revenue to cover fixed

Break-even timing Month 31 model break-even point

Break-even calculator

Use this to test whether monthly revenue clears direct costs and the fixed cost base.

Lean Base Full

Monthly revenue More revenue gives you more margin to cover fixed costs. $ Lower run rate Higher run rate Variable expenses These are direct costs that rise as delivery work rises. $ Low direct cost High direct cost

Money available to cover fixed costs $165,500 $220,667 revenue - $55,167 variable expenses

Margin ratio

75%

Covers fixed costs

Yes

Fixed monthly costs This is the monthly overhead your margin has to cover. $ Lean overhead Scaled overhead

Break-even chart Revenue Total costs

Which disaster recovery expenses are fixed, and which move with sales?

Cost classification

If you treat cloud usage like rent, break-even looks safer than it is. Keep fixed overhead, revenue-linked delivery costs, and hiring step-ups separate so Month 31 break-even is tied to real capacity and margin.

Expense	Cost	Break-Even Treatment	Common Mistake
Office Rent	Fixed	Hold at $12,000 per month from Month 1 to Month 60; include in monthly overhead.	Spreading rent as a revenue percentage and hiding occupancy drag.
Legal & Professional Services	Fixed	Model at $4,000 per month; break-even volume must cover it even in slow months.	Moving client-related legal work into variable delivery expense.
Cloud Infrastructure Costs	Variable	Use 18.0% of first-year revenue; each added sale carries hosting and recovery load.	Treating server load like rent instead of sales-linked usage.
Third-Party Software Licensing	Variable	Use 8.0% of first-year revenue; subtract it before contribution margin.	Counting licenses as fixed before usage or seat pricing is proven.
Customer Support & Technical Services	Variable	Use 3.5% of first-year revenue; it rises with client activity and recovery workload.	Treating restore labor and support tickets like office overhead.
On-call Technical Coverage	Semi-fixed	Add capacity in hiring steps when coverage needs exceed current engineering and support staffing.	Assuming existing staff can absorb every added client.
Monitoring Tools	Semi-variable	Keep a base platform charge, then add usage as client count and monitored systems rise.	Treating alerts, logs, and uptime monitoring as one flat bill.

How much does break-even improve as this disaster recovery service moves from lean to base to full scale?

Scenario table

Higher-scale contracts lift the CM ratio from 70.5% to 79.5%, so each revenue dollar covers more fixed cost. Still, fixed overhead climbs fast, so the break-even revenue threshold stays high.

Planning figures only. Actual break-even can move with staffing speed, deal mix, and customer ramp.

Scenario	Monthly Revenue	Variable Costs	Fixed Costs	CM Ratio	Operating Profit	Break-Even Signal
Lean Year 1 plan	$1,196k	$353k	$843k	70.5%	-$567k	Still near the line; any cost creep pushes break-even out.
Base Year 3 scale	$2,860k	$715k	$2,145k	75.0%	$116k	Positive EBITDA gives a small cushion, but overhead still dominates.
Full Year 5 scale	$4,307k	$883k	$3,424k	79.5%	$4,935k	Best cushion, though faster hiring can raise the dollar threshold.

What breaks the break-even plan for a disaster recovery service?

Stress test

The base case sits at about $1.196M in monthly break-even revenue, so the first-year cushion is thin. A 15% revenue miss, a 10% fixed-cost bump, or a 5-point rise in variable expense can push cash toward the -$1.064M trough.

Stress Case	Changed Assumption	Break-Even Revenue	Revenue Gap	Risk Signal
Current plan	No change.	$1.196M	$0 cushion	Base case has no cushion, so any slip hits cash fast.
Revenue shortfall	Signed recovery contracts land 15% below plan.	$1.196M	$126k gap	Fewer signed recovery contracts quickly create a monthly hole.
Fixed-cost pressure	Fixed costs run 10% higher from overtime and added staffing.	$1.315M	$119k gap	Overtime and staffing adds raise the break-even bar right away.
Margin pressure	Variable expenses rise 5 points on cloud usage and subcontractors.	$1.287M	$91k gap	Cloud overruns and subcontractor costs squeeze contribution fast.
Combined pressure	Revenue is 15% lower, fixed costs rise 10%, and variable expenses rise 5 points.	$1.416M	$262k gap	This stacked shock can drain cash toward the -$1.064M trough.

Have you verified signed revenue, cash runway, and hiring timing before you commit to the recovery build?

Founder checklist

Don’t lock in rent or major hires until signed revenue can cover the model’s Year 1 break-even pace and cash can survive through Month 31. The plan still shows a -$1.064M minimum cash point in Month 30, so timing matters as much as demand.

1Signed revenue$88.4K/mo

Verify contracts can hold that recurring run rate, because that is the monthly pace needed to cover Year 1 fixed costs at the model’s 70.5% contribution margin.

2Fixed load$62.3K/mo

Check recurring overhead before you add more rent or payroll, since the current fixed base already sits near this monthly level.

3Contribution70.5%

Confirm cloud infrastructure, software licensing, and support still leave 70.5% of revenue after direct service costs, or break-even will slip fast.

4Hire rampMonth 4-25

Delay fixed hires until booked work supports the staged build of sales, support, marketing, DevOps, operations, and security staff.

5Cash runwayMonth 31

Make sure cash can absorb the -$1.064M minimum cash point in Month 30 and last through Month 31, when break-even lands.

6Build spend$775K capex

Stage the office, servers, security, backup, portal, monitoring, and training spend only when demand is real, so the 24/7 recovery stack is ready without straining cash.