Risk Adjustment Coding Service Break-Even: About $76k Monthly Revenue

Fixed costs $46.3K/mo Core monthly base

Contribution margin 63% After variable costs

Break-even revenue $73.7K/mo Monthly target

Break-even timing Month 6 Ramp reaches even

Break-even calculator

Use this to test whether monthly revenue covers variable expenses and the fixed cost base for a risk adjustment coding service.

Lean Base Full

Monthly revenue Revenue is the cash coming in before direct costs and overhead. $ Slow month Busy month Variable expenses These are direct costs that move with work volume, like coding validation, integration fees, commissions, and travel. $ Tight costs Heavy costs

Money available to cover fixed costs $58,000 $92,000 revenue - $34,000 variable expenses

Margin ratio

63%

Covers fixed costs

Yes

Fixed monthly costs This is the monthly cost base that contribution margin has to cover. $ Lower overhead Higher overhead

Break-even chart Revenue Total costs

Which expenses are fixed, and which move with sales in this coding service?

Cost classification

Break-even is reliable only if fixed overhead, revenue-linked costs, and step-ups are separated. Launch capex totals $220.5k, so it affects cash runway and the Month 6 minimum cash need, not EBITDA break-even contribution.

Expense	Cost	Break-Even Treatment	Common Mistake
CEO and Principal Consultant salary	Fixed	Include the $185,000 annual salary as recurring monthly overhead in the first operating year.	Treating founder delivery time as free capacity.
Lead Risk Adjustment Coder salary	Fixed	Model the $95,000 salary per full-time equivalent as capacity-based overhead for core delivery.	Calling coder payroll variable just because work volume rises.
HIPAA Compliant Cloud Infrastructure	Fixed	Include $2,500 per month from Month 1 through Month 60 before contribution margin.	Spreading it only across active clients and hiding idle capacity.
Legal and Audit Fees	Fixed	Include $3,000 per month as baseline compliance overhead for operating break-even.	Leaving recurring compliance spend below the break-even line.
Contracted Coding Validation	Variable	Deduct 12% of first year revenue as a direct delivery charge before fixed overhead.	Using gross revenue as contribution without validation labor.
EHR Data Integration Fees	Variable	Deduct 6% of first year revenue as client data work scales with delivery.	Modeling integration as a one-time setup only.
Sales Commissions	Variable	Deduct 5% of revenue because it moves directly with booked sales.	Putting commissions in fixed payroll and overstating contribution margin.
Annual Marketing Budget	Semi-fixed	Use $45,000 in the first year, then step it up as the plan scales acquisition.	Treating the full budget as a per-client CAC charge.

How does break-even change from a lean founder-led setup to full staffing?

Scenario table

Break-even moves with staffing and support costs. Lean founder-led delivery clears it with the smallest revenue base, the first-year team adds a modest cushion, and full staffing lifts the break-even line fast because fixed payroll grows faster than variable costs.

Planning assumptions only; actual results can move with client mix, delivery timing, and sales pace.

Scenario	Monthly Revenue	Variable Costs	Fixed Costs	CM Ratio	Operating Profit	Break-Even Signal
Lean founder-led coding setup	$686k	$185k	$501k	73%	$0	At break-even, so cash stays tight.
Base first-year delivery team	$919k	$248k	$557k	73%	$114k	Modest cushion above break-even.
Full mature staffing model	$8.8M	$1.7M	$1.6M	81%	$5.5M	Revenue sits well above the $2.0M break-even line.

What breaks the break-even plan if client wins slow down or costs rise?

Stress test

The plan has a healthy base cushion, but it gets fragile if client wins slow, coder labor runs hot, or compliance and software spend jump. A 15% revenue miss still works; a 20% miss or a 32% variable-cost load can flip profit negative.

Stress Case	Changed Assumption	Break-Even Revenue	Revenue Gap	Risk Signal
Current plan	No change.	$762,000	$157,000 cushion	Base case clears break-even by a solid cushion.
Revenue shortfall	Revenue falls 15% to about $781,000.	$762,000	$19,000 cushion	Profit shrinks to roughly $13,000, so another small miss would erase it.
Fixed-cost pressure	Fixed coverage rises 10% from overhead, compliance, or software.	$839,000	$80,000 cushion	Every added fixed dollar raises the load on client wins.
Margin pressure	Variable expenses rise from 27% to 32%.	$819,000	$100,000 cushion	Coder overtime or extra audit work cuts margin fast.
Combined pressure	Revenue falls 15%, variable expenses rise to 32%, and fixed costs rise 10%.	$901,000	$120,000 gap	This would likely push EBITDA to about an $82,000 loss.

What should you verify before you add payroll and launch spend for risk adjustment coding?

Founder checklist

Don’t add coder payroll until the pipeline, pricing, and cash stack up against the break-even model. Here’s the quick test: Year 1 needs about $92K a month in revenue, and the business still has a $656K cash low point in Month 6.

1Pipeline Proof$92K/mo

Confirm signed or late-stage work can support about $92K in monthly Year 1 revenue before you add more payroll.

2Rate Card$225/$275/$350

Test that buyers will accept the Year 1 hourly rates for retainers, audits, and training, because pricing drives the whole margin stack.

3Fixed Load$46.3K/mo

Make sure cash can carry about $46.3K of monthly payroll and overhead before variable costs, since that is the floor you must clear.

4Contribution73% CM

Keep Year 1 variable costs near 27% of revenue, which leaves about 73% contribution before fixed overhead.

5Staffing Ramp3.5 FTE

Verify the Year 1 team size of 3.5 full-time equivalents can handle delivery now, and do not pull the Month 13 client success hire forward unless utilization is already tight.

6RunwayMonth 6 / $656K

Protect at least $656K of cash through Month 6, keep the $220.5K launch capex separate from operating runway, and hold Year 1 marketing near $45K so CAC stays close to $4.5K.