Question

Topic: Other

Breakeven Point?

Posted by Anonymous on 3/10/2013 at 9:41 PM ET 500 Points
Hi,

If i'm developing a mobile app ... how to determine the breakeven pt.

Fixed costs=
*Software engineers: Let's say -40,000 in development costs for each of the first 3 months.
*Marketing/advertising: whatever the ad spend is for the month

Variable costs=
30% of rev to platform for commission

I start having rev in month 4 (launch).

The app price is .99 cents.

Revenue will be the app price x number of users. Additional revenue from advertising.
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RESPONSES

  • Posted by Jay Hamilton-Roth on 3/10/2013 at 11:22 PM Accepted
    Don't forget your time/profit.
    But otherwise you have the formula:

    Expenses: $40,000 x 3 + monthly ad costs
    Income: $0.99 x N users + 70% advertising commission

    Set Expenses = Income, so that:
    $120000 + monthly ad costs = $.99 x N users + 70% commission

    For short-term, assume zero commission, which simplifies to:
    ($120000 + monthly ad costs ) / $.99 = N

    If you spend $2000 for 6 months on ads, for example:
    ($120000 + $12000) / $0.99 = 133,333 = number of apps you need to sell (minimum).

    If you have some expectations for revenue from advertising, adjust the formula accordingly.
    If you have more expenses or income, adjust the formulas accordingly.
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