Break-Even After a Price Increase: Revenue vs Profit
Keeping revenue constant is not the same as preserving profit.
Revenue equation
Divide previous total revenue by the new price to estimate the transactions needed at the updated rate.
Profit equation
Subtract variable cost per transaction from selling price to estimate contribution margin, then compare the total contribution needed.
Illustration
A $50 service with $15 variable cost contributes $35. At $60 it contributes $45, if the variable cost remains unchanged.
Check assumptions
Staffing, product mix and fixed expenses may change. Update the model instead of assuming every cost remains constant.
A revenue threshold in whole transactions
If current revenue is $5,000 and the new service price is $60, you need ceiling(5,000 / 60) = 84 transactions to match or exceed earlier revenue.
A profit threshold using variable costs
With a $60 selling price and $15 variable cost, each sale contributes $45. To cover $3,600 in unchanged fixed costs, you need 80 transactions. This is a different calculation from revenue break-even.
When these examples do not apply
A changed product mix, demand, capacity or variable cost requires recalculating the threshold. Neither formula predicts the market response.