Sales forecast and break-even: how much you must sell, and what if you sell less

Rent, loans and wages are fixed in contracts. Revenue is not. That makes the sales forecast the most uncertain line in your business plan and the one a lender questions first. A good forecast does not try to be right; it shows how you arrived at it, how far it can fall before you are in trouble, and what you will do if it does. The break-even point gives that second part a number.

This guide uses the worked example of Chainline Bike Workshop from the guides on business plan financials. Amounts are in euros and exclude VAT; the calculations work in any currency.

Bottom-up and top-down sales forecasts

Where your sales forecast assumptions come from

• Your own track record: jobs per day, conversion rates or average order values from a previous job or business.
• Commitments: pre-orders, letters of intent, a signed first contract, a waiting list.
• Tests: a market stall, a pop-up, a landing page with a sign-up, a few paid jobs before you start. The guide on testing your idea shows how.
• Competitors: opening hours, waiting times, prices and how busy they are at different times.
• Industry and official data: average revenue and margins per sector from industry figures, and population and business counts from national statistics offices.
• Suppliers: purchase prices, recommended retail prices and typical margins for your product range.

Write the source next to each assumption. A lender will not expect certainty, but will expect you to know which figures are firm and which are guesses.

Worked example: Chainline's sales forecast

Leo spent eight years as a dealer mechanic. He knows how long a service takes, what customers pay and which months are busy.

Fictitious Firmfocus example. Amounts exclude VAT.

Capacity check: 2,000 jobs over 250 working days is 8 a day. At about 45 minutes each that is 6 hours of repair work, which leaves Leo time for customers and bike sales. In May and June, with up to 210 jobs a month, he works close to his limit, which is why he plans a part-time mechanic from year two.

Top-down check: about 25,000 households live within easy cycling distance. If one in twelve brings him a bike once a year, that is about 2,083 jobs, close to his bottom-up figure. Selling 150 bikes means about one sale per 170 households a year, a modest share next to the two sports shops.

Seasons: the monthly split follows his dealer experience, from 20 bikes and 210 jobs in May to 6 bikes and 120 jobs in January. The monthly figures feed the cash flow forecast.

Break-even point: how much revenue covers your costs?

The US Small Business Administration defines the break-even point as the point at which total cost and total revenue are equal (source: US Small Business Administration, September 2026). For a business with several products, work in revenue rather than units, using the contribution margin per euro: the share of each euro of revenue left after the cost of sales. For Leo that is €84,000 of gross margin on €180,000 of revenue, or 46.7%.

Leo's fixed costs in year one are €46,800: €34,000 of rent and running costs, €8,800 of depreciation and €4,000 of interest.

Fictitious Firmfocus example. Calculated with the unrounded margin of 84,000 / 180,000; depreciation is deducted in the last row because it costs no cash.

The first row looks comfortable: revenue could fall by 44% before Leo makes a loss. The rows below tell the real story. Once he pays himself and the bank, the margin of safety is only 6.0%, or about €10,700 of revenue.

Low, mid and high scenarios

A single forecast hides the risk. Work out three versions, decide in advance which early signal tells you which one you are in, and what you will do.

Fictitious Firmfocus example. Fixed costs unchanged at €46,800, drawings €30,000, repayments €11,000.

In the low scenario Leo still makes a profit, but he ends the year €8,800 short, more than his €8,000 buffer. His early signal: fewer than 180 repair jobs in April, against 200 in the plan. His response: drawings down to €2,000 a month for six months, the spring stock order cut back, and a talk with the bank before the shortfall arrives rather than after.

Then change one assumption at a time to see which one matters most:

Fictitious Firmfocus example. Parts cost per repair job stays at €6.

The table shows where Leo's risk sits. Losing €30,000 of bike sales costs him €9,000 of profit; losing €15,000 of repairs costs him €12,000. A price cut of €3 per repair costs €6,000, because the whole cut comes off the margin. His plan should protect repair volume and repair prices before anything else.

Freelancer or business with premises

Pitfalls in sales forecasts

• The hockey stick: flat months followed by steep growth, with no customers, contracts or capacity to explain the climb.
• Market share as the starting point: a share picked first and revenue worked back from it, which says nothing about how you win a single customer.
• Forgetting capacity: a forecast that needs more hours than you, your staff or your premises have.
• Ignoring the seasons: a yearly figure split into twelve equal months, while customers do not buy in equal months.
• Prices without discounts: list prices in the forecast, opening offers and loyalty discounts in reality.

The sales forecast feeds the profit and loss forecast and the cash flow forecast. The overview of business plan financials shows how the budgets connect, and Start a business has every guide for new founders.