A freelance architect averages $10,000 per sale and needs to earn $20,000 per month to break even. Through experience, he finds that 10% of potential customers buys within 30 days. What is the minimum number of prospects the architect needs to break even each month?

A freelance architect averages $10,000 per sale and needs to earn $20,000 per month to break even. Through experience, he finds that 10% of potential customers buys within 30 days. What is the minimum number of prospects the architect needs to break even each month?

• A. 20
• B. 25
• C. 20
• D. 5

Answer: (C)

To break even, you need $20,000 in revenue. Each sale brings in $10,000, so you must make 2 sales. With a 10% conversion rate, you convert 0.10 of your prospects into customers. To achieve 2 sales, you need 2 ÷ 0.10 = 20 prospects. Therefore, the minimum number of prospects needed in the month is 20. If fewer prospects come in, expected revenue would fall short of the $20,000 break-even target.

To break even, you need $20,000 in revenue. Each sale brings in $10,000, so you must make 2 sales. With a 10% conversion rate, you convert 0.10 of your prospects into customers. To achieve 2 sales, you need 2 ÷ 0.10 = 20 prospects. Therefore, the minimum number of prospects needed in the month is 20. If fewer prospects come in, expected revenue would fall short of the $20,000 break-even target.