The Profitability Journey: When Does a Creator Become Profitable?

Introduction

For many small business owners and course creators, the journey to profitability can be as challenging as it is exciting. Whether you’re selling your first $5 product or scaling to premium pricing, understanding the impact of pricing structures is key. In this post, we will deep dive into different scenarios and pricing models to answer the question: When does a creator become profitable?

Understanding the Pricing Structures

Teachable’s new plan structure is designed to grow alongside your business. However, each plan has its own limitations:

• Starter Plan: $29/mo (annually billed) or $39/mo (monthly billed) with a 7.5% transaction fee.
  Note: This plan allows for only one published product (course). In this case, you rely on selling that single course multiple times.

In addition to the platform fee, you may incur processing fees from payment providers like Stripe or PayPal. For our analysis, we’ll assume an average fee of 2.5% plus $0.25 per transaction. This fee is applied on top of any platform fees.

As your business grows, you might consider:

• Builder Plan: $69/mo (annually) / $89/mo (monthly) with 0% transaction fees and a limit of 5 published products.
• Growth Plan: $139/mo (annually) / $189/mo (monthly) with a limit of 25 published products.
• Advanced Plan: $309/mo (annually) / $399/mo (monthly) with a limit of 100 published products.

Profitability Scenarios: Mapping the Numbers with Processing Fees

Below are examples illustrating how the sale price, platform fee, and processing fee affect your net revenue.

Scenario 1: Surviving on a Low-Cost Model with the Starter Plan

Assume you’re starting on the Starter Plan with a $5-priced course:

• Gross Sale Price: $5.00
• Teachable Transaction Fee (Starter): 7.5% of $5 = $0.375
• Remaining After Platform Fee: $5 - $0.375 = $4.625
• Processing Fee: 2.5% of $5 = $0.125, plus $0.25 fixed = $0.375
• Net Revenue per Sale: $4.625 - $0.375 = $4.25

The monthly subscription cost on an annually billed Starter Plan is $29.
Break-even Analysis:

• To cover just the monthly cost, you need about 7 sales:
  7 sales x $4.25 ≈ $29.75

My Take: While selling 7 units of your single course per month might seem manageable in theory, relying on one product exposes you to high risk. A dip in sales could critically affect overall revenue, emphasizing the need for either increased pricing or product diversification as soon as possible.

Scenario 2: Scaling Up with the Builder Plan

Once you’ve validated your concept, you might upgrade to the Builder Plan, which allows for up to 5 published courses and removes the Teachable transaction fee. Let’s consider two pricing options:

Option A: Continuing with $5 Courses

• Gross Sale Price: $5.00
• Processing Fee: As before, 2.5% of $5 ($0.125) + $0.25 = $0.375
• Net Revenue per Sale: $5.00 - $0.375 = $4.625
• Monthly Subscription Cost (Annually Billed): $69
• Break-even Sales Required: $69 / $4.625 ≈ 15 sales

Option B: Increasing Course Price to $10

• Gross Sale Price: $10.00
• Processing Fee: 2.5% of $10 = $0.25, plus $0.25 = $0.50
• Net Revenue per Sale: $10 - $0.50 = $9.50
• Break-even Sales Required: $69 / $9.50 ≈ 7.26, approximately 8 sales

My Perspective: Transitioning to the Builder Plan not only removes the platform fee but also grants you more freedom to diversify your course offerings. Increasing your price as your reputation grows can significantly reduce the number of sales needed to break even. Diversification helps mitigate risk by not relying solely on one product.

Scenario 3: Larger-Scale Operations on Growth/Advanced Plans

Now suppose you have established an audience and want to offer premium courses, say at $25 each, on the Growth Plan:

• Gross Sale Price: $25.00
• Processing Fee: 2.5% of $25 = $0.625, plus $0.25 = $0.875
• Net Revenue per Sale: $25 - $0.875 = $24.125
• Monthly Subscription Cost (Annually Billed): $139
• Break-even Sales Required: $139 / $24.125 ≈ 5.76, so roughly 6 sales per month

Personal Insight: As you move to higher-tier plans, the subscription fee naturally increases, but the ability to charge a premium price and include advanced features helps you reach profitability with fewer sales. This evolution—from a single low-priced offering to diversified, value-added products—is pivotal for long-term sustainability and growth.

Conclusion: The Path to Profitability

The journey to profitability as a creator is shaped by strategic pricing, the influence of transaction fees, and the timing of scaling up:

• Starter Plan: You’re locked into a single product. Achieving profitability means selling that one course multiple times—even with a sale at $5, around 7 sales are needed monthly to cover costs.
• Builder Plan: Upgrading removes the platform fee and allows product diversification. Whether you continue with $5 products (needing about 15 sales) or move to $10 products (needing around 8 sales), the path grows clearer.
• Growth/Advanced Plans: As your offering becomes more premium (e.g., $25 per course), the higher fixed costs are offset by higher net revenue per sale, reducing the number of sales needed to break even.

Adjusting for additional processing fees (2.5% + $0.25 per transaction) sharpens our understanding of true net revenue, which is essential for making informed decisions about pricing and scaling your business.

Each stage of your journey has its trade-offs and opportunities. I encourage you to continuously track your sales data, experiment with pricing strategies, and engage in community discussions to share insights and adjust your path to sustainable profitability.

Use my Free Break-even Calculator to quickly discover your break-even point based on your Teachable plan and pricing structure.

Have you experienced any turning points in your pricing strategy as you scaled up? Share your experiences in our Facebook group so we can all learn from each other on the road to success!