Consulting · cost-volume-profit · break-even analysis

The break-even line
of a consulting firm

Revenue rises straight with every billable hour; total cost starts at the fixed overhead and rises with the variable cost per hour. Where the two lines cross is the break-even point — below it you lose money, above it profit grows linearly. The horizontal axis is billable hours per month; each consultant can bill at most 8 hours × 22 days = 176 hours a month.

Break-even point
Break-even utilization
Contribution margin / hour
Max profit at full capacity
Revenue Total cost Profit Break-even · capacity
Revenue: R(h) = rate · h  ·  Total cost: C(h) = fixed + varCost · h  ·  Profit: π(h) = (rate − varCost)·h − fixed
Break-even: h* = fixed / (rate − varCost)  ·  Capacity: consultants × 176 billable hours / month