Understanding your breakeven point is essential. It tells you how much money you need to make just to stay in business, and helps you set realistic revenue targets.
What Is the Breakeven Point?
The breakeven point is the level of revenue at which your total income exactly covers your total costs, both fixed and variable. Below this point, you’re making a loss. Above it, you’re in profit.
The Formula
Breakeven Point = Fixed Costs ÷ (Selling Price per Unit − Variable Cost per Unit)
A Simple Example
- Fixed costs (rent, salaries, insurance, software): $10,000/month
- Average selling price per unit/job: $500
- Variable cost per unit/job: $200
- Contribution margin: $500 − $200 = $300
- Breakeven: $10,000 ÷ $300 = 34 units/jobs per month
Why It Matters
- Sets a clear minimum revenue target
- Helps you price products and services correctly
- Informs decisions about hiring, expansion and investment
- Shows lenders and investors you understand your numbers
Need help calculating your breakeven? Our team can help you build a clear financial picture of your business.
