Engine Overhaul Break-Even Analysis: $74K Monthly Revenue Target

Fixed costs $11.8K/mo Core overhead

Contribution margin 86% After direct costs

Break-even revenue $72.6K/mo Cover full overhead

Break-even timing Month 14 Model break-even

Break-even calculator

Use this calculator to test monthly revenue, direct costs, and fixed overhead against break-even for an engine rebuild shop.

Lean Base Full

Monthly revenue Revenue sets the margin available to cover fixed costs. $ Slow month Peak month Variable expenses These are direct parts, materials, and selling costs that rise with each job. $ Tight costs Heavy costs

Money available to cover fixed costs $163,500 $188,000 revenue - $24,500 variable expenses

Margin ratio

87%

Covers fixed costs

Yes

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

Break-even chart Revenue Total costs

Which engine overhaul expenses are fixed, variable, semi-variable, or semi-fixed for break-even?

Cost classification

Break-even gets unreliable when fixed overhead, direct rebuild spend, and staffing steps are blended together. Keep job-linked costs tied to each overhaul, and treat monthly capacity costs separately.

Expense	Cost	Break-Even Treatment	Common Mistake
Workshop lease	Fixed	Use $10,000 per month in fixed overhead from Month 1 through Month 60.	Allocating rent per engine and hiding the true monthly hurdle.
Business insurance, software licenses, and security system	Fixed	Include $1,750 per month as fixed overhead: $800 insurance, $700 software, and $250 security.	Dropping small recurring bills from break-even because they feel minor.
Engine parts kits, fluids, gaskets, and direct shop supplies	Variable	Apply these as direct rebuild spend by service line, tied to each completed job.	Spreading core charges across all jobs instead of matching them to the right build.
Machining consumables and custom machining materials	Variable	Keep machining materials tied to job volume and service mix, not monthly overhead.	Treating outsourced machining like overhead and overstating contribution margin.
Sales commissions	Variable	Use the model rate by year, starting at 3.0% of revenue in the first year.	Using a flat dollar amount even though commissions move with sales.
Marketing per project	Variable	Use the model rate by year, starting at 2.0% of revenue in the first year.	Putting project marketing into fixed overhead and missing job-level margin pressure.
Utilities	Semi-variable	Start with the $1,500 monthly base, then watch for usage increases as shop volume rises.	Assuming the utility bill stays flat when more engines run through the shop.
Technician and shop staffing	Semi-fixed	Treat first-year payroll as $49,167 per month, then step it up as full-time equivalent staffing increases.	Modeling labor as fully variable and missing the cash hit from hiring ahead of capacity.

How does break-even change from a lean launch mix to a full shop flow?

Scenario table

The lean shop is close to the line, the base case clears it, and the full shop has a wide cushion. Fixed costs stay heavy, so each added job matters a lot.

Planning figures are model assumptions, not guarantees; actual break-even will move with job mix, labor load, and parts costs.

Scenario	Monthly Revenue	Variable Costs	Fixed Costs	CM Ratio	Operating Profit	Break-Even Signal
Year 1 launch mix	$78,333	$11,519	$63,117	85.3%	($131,000)	Near the line; Month 14 is the turn.
Year 2 base flow	$132,042	$18,480	$68,950	86.0%	$266,000	Break-even is crossed and the cushion starts.
Year 5 full shop flow	$309,167	$35,625	$95,617	88.5%	$1,502,000	Strong cushion; fixed costs are covered well.

What pressure points break the break-even plan for this engine overhaul shop?

Stress test

Year 1 has only a thin cushion. If booked jobs slip, overhead rises, or machining and parts costs move up, break-even jumps fast and the monthly gap shows up quickly.

Stress Case	Changed Assumption	Break-Even Revenue	Revenue Gap	Risk Signal
Current plan	No change.	$73,993	$4,340 cushion	Base case is close to the line.
Revenue shortfall	Revenue falls 10% to $70,500.	$73,993	$2,980 gap	Fewer booked jobs wipe out most of the cushion.
Fixed-cost increase	Overhead rises 10% to $69,428.	$81,393	$3,060 gap	Lease and shop overhead push break-even higher fast.
Margin pressure	Variable expense rate rises 5 points to 19.7%.	$78,601	$268 gap	Higher machining bills and warranty pressure erase the margin edge.
Combined pressure	Revenue falls 10%, overhead rises 10%, and variable expense rate rises 5 points.	$83,316	$12,816 gap	Three hits together push the shop into monthly loss risk.

Can you sign the workshop lease before this engine overhaul shop proves it can cover fixed costs?

Founder checklist

Do not commit until the shop can handle the lease, payroll, equipment spend, and early losses. If lead flow, cash, and parts sourcing do not clear the model’s Month 13 trough, the Month 14 break-even case is weak.

1Lead flow12.5 jobs/mo

Verify incoming work can reach about 12 jobs a month before you sign the lease, because that is the pace needed to support the first-year plan.

2Demand proof150 jobs

Confirm the first-year mix of Standard V6, Performance V8, Classic Inline 6, Commercial Diesel, and Hybrid work is real demand, not hopeful volume.

3Fixed load$63.1K/mo

Check that the $10,000 workshop lease fits inside a $63,117 monthly fixed burden, because payroll and overhead set the cash floor.

4Margin mix79-88% CM

Validate parts sourcing and other variable costs across all five job types, because contribution margin stays healthy only if direct spend stays near plan.

5Capacity build$365K capex

Make sure the machining center, clean room, diagnostics, lifts, tools, IT, marketing assets, and welding equipment are funded, and that Year 1 staffing can ramp to owner, 2 lead technicians, machinist, junior technician, shop manager, admin, and a half-time sales role.

6Cash cushion$807K

Do not open until you can carry the $807,000 minimum cash need through Month 13, because that is the low point before breakeven.