6 · Pricing and break-even: how many do you have to sell?

Two of the most important decisions a founder makes are what to charge and how many you must sell to stop losing money. Get the price too low and you work hard to go broke; price with a plan and the rest of your finances start to make sense.

Pricing, in plain terms:

• Cover your costs first. If a unit costs you $6 to make and deliver, a $5 price guarantees a loss on every sale, no matter how many you sell.
• Price for the value and the market, not just cost. What is it worth to the customer? What do alternatives cost? (That's the market research from F4.)
• Leave room for margin. Price − cost-per-unit = your unit margin (Lesson 3). That margin is what eventually pays for your tools, your time, and your profit.

Break-even: the number that tells you if your plan is realistic. Your break-even point is how many units you must sell to cover your fixed costs — the costs you pay no matter what (tools, a stall fee, software). The SBA's startup-costs and break-even guidance is exactly this calculation (SBA, n.d.).

Break-even (units) = Fixed costs ÷ Unit margin

Worked example (verify it yourself): fixed costs of $120/month (a $20 tool + a $100 craft-fair table), and a unit margin of $9 per candle ($15 price − $6 cost). Break-even = $120 ÷ $9 ≈ 13.3, so you must sell 14 candles that month just to get to zero. Candle #15 is your first real profit. (Did you re-check 120 ÷ 9? Good — that's the habit.)

Where AI helps vs. fools you: AI can explain break-even, set up the formula in a sheet, and list cost categories you forgot. But if you ask it to calculate your break-even, re-do the division yourself — a wrong break-even tells you a doomed price is fine. And only you know your real fixed costs and real unit margin; a model's guesses aren't your business.

Check yourself. With $200 in fixed costs and a $10 unit margin, what's your break-even in units — and how did you check the number yourself?

Sources

• U.S. Small Business Administration. (n.d.). Calculate your startup costs — fixed vs. recurring costs and break-even analysis. https://www.sba.gov/business-guide/plan-your-business/calculate-your-startup-costs
• U.S. Small Business Administration. (n.d.). Manage your finances — cost-benefit analysis behind pricing decisions. https://www.sba.gov/business-guide/manage-your-business/manage-your-finances