How to Calculate Business Break-Even
Break-even is the point where revenue stops being less than cost. The formula is simple; the honesty of the inputs you feed it is what actually determines whether the answer means anything.
The formula
Break-even (in units) = Fixed Costs ÷ (Price per unit − Variable Cost per unit). The denominator is your contribution margin — what's left from each sale after the cost of making/delivering it, before fixed costs are covered.
Worked example
A car detailing service charges €45 per job, spends €12 per job on supplies, and has €800 in fixed monthly costs (rent, insurance, subscriptions).
- Contribution margin: €45 − €12 = €33 per job
- Break-even: €800 ÷ €33 ≈ 25 jobs per month
Below 25 jobs a month, this business loses money; above it, each additional job is mostly profit. That single number — 25 — is far more decision-useful than "will this be profitable?"
Where break-even calculations quietly go wrong
Customer acquisition cost left out
If you spend money to get each customer (ads, referral fees), that's a per-unit cost too — leaving it out understates true variable cost.
Fixed costs underestimated
Insurance, software subscriptions, and "small" recurring costs add up — a break-even number built on an incomplete fixed-cost list is optimistic by construction.
One static price
Real pricing often varies by customer or season — a single average price can hide a break-even point that shifts a lot month to month.
From break-even to ROI and runway
Break-even tells you when you stop losing money each month — it doesn't tell you when you recover your original investment (that's payback/ROI), or how long your starting budget lasts if you're below break-even for a while (that's runway). All three come from the same underlying assumptions, which is why they're normally calculated together. See Financial Analysis.
Run the calculation with conservative numbers first. If the business still clears break-even on a pessimistic customer count, that's a much stronger signal than clearing it only on an optimistic one.
FAQ
Is break-even the same as profitability?
No — break-even is the point profit becomes zero (from negative); real profitability is being comfortably above that point, with margin for a slow month.
Does break-even account for one-time startup costs?
The monthly break-even formula covers ongoing fixed and variable costs; startup costs are separately recovered over time and factored into ROI and runway, not the monthly break-even point itself.