Break-even
When does a coffee shop start paying for itself?
The SBA formula, a worked example, and the timeline benchmarks that matter for planning.
The SBA break-even formula
The U.S. Small Business Administration defines break-even with a simple formula:
Fixed costs ÷ (Price − Variable costs)
Fixed costs are the expenses that stay the same every month — rent, insurance, salaries, loan payments, software. Variable costs rise and fall with each drink you sell: coffee beans, milk, cups, lids, and payment processing. The difference between your average ticket price and the variable cost of that ticket is your contribution margin. Divide monthly fixed costs by that contribution margin and you get the number of tickets you need to sell each month just to cover your costs.
The SBA also advises counting at least one year of monthly expenses when estimating startup capital. That working capital cushion is what gives a new shop time to reach break-even without running out of cash.
Worked example
A small cafe with realistic assumptions, step by step.
Monthly break-even calculation
Assumptions for a 1,000 sq ft shop with two part-time baristas and an owner-operator.
| Assumption | Value | Note |
|---|---|---|
| Average ticket | $6.50 | One drink plus occasional pastry, blended across menu |
| Variable cost per drink | $2.10 | Beans, milk, cup, lid, and payment fees at roughly 32% COGS |
| Contribution margin per ticket | $4.40 | Price minus variable cost |
| Monthly fixed costs | $9,800 | Rent, insurance, utilities, software, and part-time wages |
| Monthly break-even tickets | 2,228 | Fixed costs ÷ contribution margin |
| Daily break-even tickets | 74 | Based on 30 operating days per month |
This example uses illustrative assumptions, not source data. Swap in your own rent, wages, and menu prices to see how the number moves.
Timeline benchmarks
What industry sources report for time to profitability.
Median: 5 months
RestaurantOwner, 2018
RestaurantOwner’s survey found a median time to profitability of 5 months, with an upper quartile of 12 months. Half of operators reached break-even faster; a quarter took a year or more.
6–12 months
WebstaurantStore
WebstaurantStore’s coffee shop guide states that a new coffee shop typically becomes profitable in 6 to 12 months.
First few years
Toast, 2024
Toast’s revenue data report notes that most coffee shops become profitable within the first few years of operation — a wider window that reflects how much location and concept matter.
What to stress-test
A break-even estimate is only as good as the assumptions behind it. Before you sign a lease, run the numbers again with less favorable inputs:
- Lower average ticket. If customers order drip coffee instead of espresso drinks, your contribution margin shrinks. Try $5.50 instead of $6.50.
- Higher variable costs. Milk and coffee bean prices move. A 10% increase in variable cost per drink can add hundreds of tickets to your monthly target.
- Higher fixed costs. Rent is the biggest lever. A space that costs $1,000 more per month raises the break-even point by roughly 227 tickets in the worked example.
- Slower ramp. New shops rarely hit full sales in month one. Model a 60–70% sales ramp for the first three to six months and check whether your working capital still covers the gap.
If the stressed estimate still fits your market and your cash reserve, the plan is more resilient. If not, the levers are clear: negotiate rent, simplify the menu, or raise the average ticket with food and specialty drinks.