The math of OEM business: how to calculate the break-even point?

31.08.16
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The math of OEM business: how to calculate the break-even point?

There are a lot of things you should analyze before starting your own business: market size and volume, customers’ needs, level of competition, key advantages and strengths of market leaders, power of brands etc.

All this analysis will find output on the pages of your business plan, where the key question you will have to answer is “what is the break-even point of my business?”

In other words, you will have to find out how many units of product will you have to sell to your customers to make business at least not unprofitable and to reach the point, when you will start to receive profit.

If you have read our article about methods of antivirus software monetizing, you know that the most popular and commonly used method is direct selling of license keys. So, in case of antivirus software business, this question of your financial model can be paraphrased as follows: “how many license keys do you have to sell before becoming profitable?”

The break-even point in units for your antivirus software business is the number of license keys you need to sell in order to cover the company's fixed and variable expenses. The break-even point’s formula is to divide the total amount of fixed costs by the contribution margin license key.

We have prepared a simple financial model of antivirus software business that will help you to make your own calculations, based on expected costs of business and sales volumes. Use the button bellow to download the Excel file.

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#OEM Business digest: First issue
Everything about OEM-partnership and cybersecurity market