VHS To Digital Conversion Service Break-Even: $345K/Month

Fixed costs $25.2K/mo Payroll + overhead

Contribution margin 88% After variable cost

Break-even revenue $28.6K/mo Monthly target

Break-even timing Month 25 Model break-even

Break-even calculator

Use this calculator to test monthly revenue, direct costs, and fixed overhead against break-even for a VHS to digital conversion shop.

Lean Base Full

Monthly revenue Revenue is the top line that creates room for fixed costs after direct expenses. $ Low volume High volume Variable expenses These are direct costs that rise with each tape conversion, like media, shipping, and processing. $ Low direct costs High direct costs

Money available to cover fixed costs $45,233 $60,583 revenue - $15,350 variable expenses

Margin ratio

75%

Covers fixed costs

Yes

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

Break-even chart Revenue Total costs

Which expenses stay fixed and which move with sales in this tape conversion service?

Cost classification

Break-even only works if each expense follows the right driver. Rent and insurance sit monthly, supplies and fees move with orders, and labor or equipment capacity steps up as tape volume grows.

Expense	Cost	Break-Even Treatment	Common Mistake
Facility Rent	Fixed	Model as $4,500 per month from Month 1 through Month 60.	Allocating rent per tape and making break-even look easier as volume rises.
Business Insurance	Fixed	Model as $600 per month, independent of order count in the planning range.	Dropping insurance from break-even because it doesn’t touch production directly.
Digital Media Cost	Variable	Model as $0.60 per tape because it changes with each completed conversion.	Using only revenue percentages and missing the unit media charge.
Packaging Materials	Variable	Model per order or per tape, including the $0.45 unit packaging assumption.	Treating bulk packaging purchases as fixed even when orders drive usage.
Payment Processing	Variable	Model as a revenue-linked fee, starting at 1.2% in the first year.	Leaving card fees below the line instead of reducing contribution margin.
Outbound Shipping	Variable	Model as order-linked fulfillment expense, starting at 1.8% of revenue.	Treating shipping as fixed when more customer orders create more shipments.
Utilities and Electricity per Tape	Semi-variable	Model the $750 monthly utility base plus $0.08 electricity for each tape.	Using only the monthly bill and missing the usage charge from higher volume.
Technician Staffing	Semi-fixed	Model staffing as capacity steps up, from 0.5 technician FTE in the first year to 2.0 FTE by the fourth year.	Treating technician labor and rework as fixed while order volume drives workload.

How does break-even move from a lean opening month to a base year and a full-scale VHS conversion setup?

Scenario table

Break-even shifts because each scenario changes revenue, labor, and fixed overhead at the same time. Higher volume spreads the shop's costs across more tapes, so the contribution margin covers more of the fixed base.

Planning figures only; actual break-even will move with mix, payroll timing, and throughput.

Scenario	Monthly Revenue	Variable Costs	Fixed Costs	CM Ratio	Operating Profit	Break-Even Signal
Lean Year 1 setup	$26.5k	$7.2k	$25.2k	73.0%	-$5.8k	Still short of break-even, with about an $8.0k monthly gap.
Base Year 2 ramp	$43.2k	$11.0k	$30.1k	74.5%	$2.0k	Near break-even with a small monthly cushion.
Full Year 5 scale	$97.3k	$22.8k	$39.2k	76.5%	$35.3k	Well above break-even and covering overhead comfortably.

What breaks first if revenue slips or costs rise for this VHS conversion service?

Stress test

The plan is tight at launch. With about $265k monthly revenue against $252k of fixed overhead, break-even sits near $345k, so a small sales miss or cost rise widens the loss fast.

Stress Case	Changed Assumption	Break-Even Revenue	Revenue Gap	Risk Signal
Current plan	No change.	$345k	$80k gap	Break-even sits above the base plan.
Revenue shortfall	Monthly revenue falls 10% to about $239k.	$345k	$106k gap	A small intake miss lifts the monthly loss fast.
Fixed-cost pressure	Fixed overhead rises 10% to about $277k.	$379k	$114k gap	Higher payroll and facility load push break-even out.
Margin pressure	Contribution margin falls 5 points to about 68%.	$371k	$106k gap	Rework, shipping, or ads can eat the cushion.
Combined pressure	Revenue drops 10%, margin falls to about 68%, and fixed costs rise 10%.	$407k	$168k gap	Sales and cost pressure together move break-even out of reach.

What should a VHS-to-digital founder verify before signing the lease?

Founder checklist

Before you sign the lease or add payroll, prove the shop can process about 1,250 tapes a month, hold margin near 88%, and keep cash above the $975K low point. If those three miss, break-even slips and the setup cost gets heavy.

1Monthly intake1,250/mo

Confirm incoming tapes can reach the Year 1 break-even pace, because the fixed cost base only works if the queue stays full.

2Core margin88% CM

Check that the mix stays close to the Year 1 math, because VHS Standard, VHS HD, Hi8, and MiniDV carry strong margin only if repair work stays small.

3Fixed load$7.1K/mo

Keep rent at $4,500, utilities at $750, insurance at $600, and internet at $450, and treat the $110K startup build as separate from this monthly load.

4Staff ramp3.6→4.8 FTE

Keep capture decks, backup capacity, and quality control stable at the Year 1 team size before you move toward the Year 2 staffing step-up.

5Cash cushion$975K

Hold enough cash to reach the model’s low point in Month 37, because the business needs a deep reserve before it turns cash-positive.

6Ad proof$318K Y1

Do not lock in heavier ad spend until paid demand can support the Year 1 revenue path, or you may buy traffic before volume is ready.