An engineering service needs about $613K in monthly revenue to break even under the Year 1 assumptions Here’s the quick math: $5025K fixed costs ÷ 82% contribution margin = $613K Fixed costs include $1775K in office and admin overhead, about $3042K in payroll, and $208K in monthly marketing The model reaches break-even in Month 9, but still shows -$110K EBITDA in Year 1, so early cash coverage matters
Fixed costs$43.6K/mo
Core staffing + overhead
Contribution margin82%
After variable costs
Break-even revenue$53.1K/mo
Revenue needed
Break-even timingMonth 9
Model crossover
Break-even calculator
Test whether monthly revenue covers variable expenses and the fixed cost base this engineering service has to carry.
Money available to cover fixed costs$73,600
$80,000 revenue - $6,400 variable expenses
Margin ratio
92%
Covers fixed costs
Yes
Break-even chart Revenue Total costs
Which expenses are fixed, and which move with sales for this engineering service business?
Cost classification
Break-even is only reliable if recurring overhead, hiring steps, and revenue-linked project costs are separated. Here’s the quick math logic: fixed costs set the monthly hurdle, while variable costs reduce margin on each billed hour.
Expense
Cost
Break-Even Treatment
Common Mistake
Office Rent ($8,000/month)
Fixed
Include as recurring monthly overhead from Month 1 through Month 60.
Tying rent to project volume when it stays stable in the planning range.
Professional Liability Insurance Base ($2,500/month)
Fixed
Include as fixed monthly overhead before calculating the revenue needed to break even.
Ignoring base insurance because it does not attach to one project invoice.
Principal Engineer / CEO Salary ($180,000/year)
Fixed
Include as fixed labor once hired, since the role is staffed at 1.0 FTE each year.
Treating founder salary as optional and understating the real break-even target.
Senior Project Engineer Salary ($130,000/year)
Fixed
Include as fixed labor once hired; staffing starts at 1.0 FTE and scales to 3.0 FTE by Year 5.
Modeling all engineer pay as variable when capacity is committed ahead of revenue.
Project Manager Salary ($110,000/year)
Semi-variable
Add in hiring steps as staffing rises from 0.5 FTE in the first year to 2.0 FTE in Year 5.
Smoothing the hire across months and hiding the cash impact of step-up staffing.
Project-Specific Software Licenses (4.0% in first year)
Variable
Deduct as a percentage of project revenue when calculating contribution margin.
Putting usage-based project software into fixed overhead and overstating gross margin.
Third-Party Specialist Fees (6.0% in first year)
Variable
Deduct directly from revenue because specialist fees move with project delivery volume.
Ignoring subcontractor pass-through and making break-even look too low.
Proposal Development & Bid Costs (5.0% in first year)
Variable
Include as a revenue-linked selling expense tied to winning and quoting work.
Treating bid effort as free even though it rises with sales activity.
How does break-even change from lean launch staffing to a full engineering team?
Scenario table
Hiring lifts fixed cost faster than revenue, so the break-even bar moves up fast. Here’s the quick math: lean clears at about $46K a month, the base case at about $51K, and the full team at about $90K.
Planning assumptions only; actual break-even will move with project mix, pricing, and hiring timing.
Scenario
Monthly Revenue
Variable Costs
Fixed Costs
CM Ratio
Operating Profit
Break-Even Signal
Lean launch staffing
$46.4K
$8.4K
$38.1K
82%
$0
Lowest hurdle, but the pipeline still has to cover salaried delivery.
Base Year 1 staffing
$51.0K
$9.2K
$41.8K
82%
$0
This is the step where the next hire needs signed work.
Full Year 3 staffing
$89.9K
$13.5K
$76.4K
85%
$0
Biggest cushion requirement; wait for steady volume before adding it.
What breaks the break-even plan if revenue slips or costs run hot?
Stress test
The base plan clears break-even at about $613K revenue with an 82% contribution margin. A 10% revenue miss, a 10% fixed-cost jump, or margin falling to 77% pushes the plan back fast; project delays, scope creep, and specialist fee overruns are the first warning signs.
Stress Case
Changed Assumption
Break-Even Revenue
Revenue Gap
Risk Signal
Current plan
No change.
$613K
$0 gap
Month 9 is the hinge point.
Revenue shortfall
Revenue drops 10% to about $552K.
$613K
$61K gap
A top-line miss leaves the plan underwater.
Fixed-cost pressure
Fixed costs rise 10% to about $553K.
$674K
$61K gap
Higher overhead needs more sales to stay even.
Margin pressure
Variable expenses rise from 18% to 23%.
$653K
$40K gap
Subcontractor overruns push break-even higher.
Combined pressure
Fixed costs rise 10% and margin falls to 77%.
$718K
$105K gap
Delays plus fee creep make the plan fragile.
What should the founder verify before locking in the office and hires?
Founder checklist
Before you lock in rent or headcount, confirm signed work can carry at least $613K a month and that you can survive the Month 8 cash trough of $679K. If either number is shaky, the break-even case is too thin.
1Demand Pipeline$613K/mo
Verify signed work can reach this monthly revenue at the Year 1 rates of $250 design, $200 advisory, $275 oversight, and $180 retainer support per hour.
2Fixed Load$17.75K/mo
Check that the base monthly overhead, including the $8K office rent, is truly needed before you sign a lease.
3Margin Mix82% CM
Verify the project mix still clears the 18% direct-cost load from software, specialist fees, travel, and bid work so fixed costs stay covered.
4Staffing RampMonth 7
Confirm backlog supports the Project Manager start in Month 7 before you add the Junior Engineer in Month 13 or the Business Development Manager in Month 25.
5Cash Cushion$679K
Protect the Month 8 minimum cash need at this level so capex, payroll, and project ramp do not outrun collections.
6Launch Spend$25K / $2.5K CAC
Verify Year 1 marketing spend can produce qualified leads at the $2,500 CAC level before you count on new sales growth.
