Tire Shop Break-Even Analysis: About $298K Monthly Revenue

Fixed costs $24.1K/mo Year 1 base

Contribution margin 84.5% After variable costs

Break-even revenue $28.5K/mo Monthly target

Break-even timing Month 31 Modeled break-even

Break-even calculator

Test whether monthly tire shop revenue covers variable expenses and the fixed cost base.

Lean Base Full

Monthly revenue Revenue from tire sales, installs, and repairs drives the margin left for fixed costs. $ Slow month Peak month Variable expenses Use direct costs that rise with sales, like product cost, repair materials, marketing, and commissions. $ Low cost High cost

Money available to cover fixed costs $58,000 $86,000 revenue - $28,000 variable expenses

Margin ratio

67%

Covers fixed costs

Yes

Fixed monthly costs This is the monthly overhead the shop must cover before profit starts. $ Lean setup Large shop

Break-even chart Revenue Total costs

Which tire shop expenses stay fixed, and which move with sales?

Cost classification

Break-even is only reliable when rent, payroll, materials, fees, and sales-linked spend sit in the right bucket. Misclassify one large line, and Month 31 break-even can look earlier than cash will allow.

Expense	Cost	Break-Even Treatment	Common Mistake
Facility Lease	Fixed	Include $4,000 in monthly overhead from Month 1 through Month 60.	Spread rent per tire and hide the real monthly hurdle.
Utilities	Semi-variable	Start with the $800 monthly base, then allow usage to rise as bay activity grows.	Treat the full bill as fixed when compressors, lifts, and shop hours increase.
Business Insurance	Fixed	Include $500 in monthly overhead; it doesn’t move with tire count.	Add insurance to each order and overstate variable burden.
Shop Manager, Lead Tire Technician, Tire Technician, Customer Service Advisor, General Helper	Semi-fixed	Model wages in staffing steps as full-time equivalent headcount rises with volume.	Treat salaries as fully variable and make break-even look too easy.
Tire Disposal Fees	Variable	Apply 1.0% of sales in the first year as a direct volume-linked charge.	Put disposal fees in overhead and miss margin pressure on each job.
Direct Repair Materials	Variable	Apply 1.5% of sales in the first year to repair activity.	Ignore small materials because each ticket feels minor.
Marketing and Advertising	Variable	Use 8.0% of sales in the first year when modeling customer acquisition spend.	Lock marketing as one flat dollar amount while sales scale.
Sales Commissions	Variable	Deduct 5.0% of sales in the first year before contribution margin.	Leave commissions below the break-even line and overstate profit per order.

How does break-even shift from a lean tire shop to a base shop and then a full build?

Scenario table

Lean is still below break-even, base sits on it, and full has the best cushion. The swing comes from higher traffic and bigger tickets, but fixed payroll also rises, so cash can lag even when revenue looks strong.

Planning assumptions only; repeat demand, inventory timing, and supplier tire margins can move actual cash results.

Scenario	Monthly Revenue	Variable Costs	Fixed Costs	CM Ratio	Operating Profit	Break-Even Signal
Lean tire shop setup	$248K	$38K	$252K	84.5%	-$42K	Still short; needs more traffic or higher tickets.
Base tire shop setup	$298K	$46K	$252K	84.5%	$0	At break-even, with no cushion yet.
Full tire shop setup	$779K	$99K	$317K	87.3%	$363K	Wide cushion, but only if service mix holds.

What pushes the tire shop past break-even?

Stress test

The shop is most exposed to sales softness and overhead creep. At the current plan, break-even is about $298k a month; a 10% sales miss, $30k more fixed cost, or weaker margins from discounts and overtime can push it up fast.

Stress Case	Changed Assumption	Break-Even Revenue	Revenue Gap	Risk Signal
Current plan	No change.	$298,000	$0 gap	Barely clears fixed overhead at 84.5% margin.
Revenue shortfall	Sales run 10% below the break-even level.	$298,000	$30,000 gap	About a $25k monthly loss at that sales level.
Fixed cost increase	Fixed overhead rises by $30,000 a month.	$334,000	$36,000 gap	Lease and payroll pressure push the target higher.
Margin pressure	Variable expenses rise from 15.5% to 20.5% of sales.	$317,000	$19,000 gap	Discounts, overtime, and slow turns cut contribution.
Combined pressure	Sales fall to $268,000 while fixed overhead rises to $282,000 and margin drops to 79.5%.	$355,000	$87,000 gap	This setup creates about a $69k monthly loss.

Can this tire shop clear break-even before you sign the lease?

Founder checklist

Do not sign the lease until the shop can carry the $4,000 facility cost, the first-year burn, and the equipment buy before Month 31 break-even. The model also needs the $274K cash cushion by Month 33, so break-even is not the same as cash safety.

1Launch demand93 buyers/mo

The Year 1 traffic forecast converts to about 93 new buyers a month at 18%, so verify the market can still push past the 114-order break-even pace.

2Lease fit$4K/mo

Verify the site can carry the $4,000 facility cost inside the first-year burn, because rent shows up before the shop has steady volume.

3Fixed load$25.2K/mo

Add rent, utilities, insurance, software, supplies, pro services, security, waste, and 4.5 FTE payroll, because that is the monthly burn the shop has to carry.

4Order margin84.5% CM

The Year 1 mix and service pricing leave about 84.5% contribution before fixed costs, so watch discounts, wage creep, and slow work that can drain that spread.

5Startup capex$125K

Fund the $50K fit-out, $15K mounting machine, $10K balancer, $20K lifts, $8K compressor, plus the rest of the build-out, and lock supplier terms before buying inventory.

6Cash cushion$274K / Month 33

Keep the $274K minimum cash cushion through Month 33, because Month 31 break-even does not cover early losses or the timing of equipment spend.