finance
Break-Even Point
Revenue level where total costs equal total revenue. Below it you lose money; above it you make money.
Definition
Break-even point is where total revenue equals total cost - the moment you stop losing money but haven't yet made any. Calculated as Fixed Costs / (Price per Unit - Variable Cost per Unit), or in dollars as Fixed Costs / Gross Margin %. A business with $50K monthly fixed costs and 50% gross margin breaks even at $100K monthly revenue. Knowing your break-even revenue tells you how much you have to sell every month just to keep the lights on, before any profit.
In your business
- →Calculate annually and after any major expense change (new hire, new office)
- →Use it to pressure-test growth plans - can you sustainably hit break-even?
- →Track 'months above break-even' as a stability metric