Glossary / Break-Even Point
Break-Even Point
Your break-even point is how much you must sell to cover all your costs. Divide fixed monthly costs by your gross margin expressed as a decimal.
Work out yours
Break-even revenue = fixed monthly costs ÷ gross margin
$8,000
You need $8,000 a month before anything is profit.
Why it matters
Break-even is the line between working and working for free. Knowing it turns a vague sense of a slow month into a specific number you either cleared or did not, which changes how quickly you react.
Where people get it wrong
Pay yourself inside fixed costs. A break-even that assumes the owner works unpaid is not a break-even, it is a subsidy.
If this number is not where you want it
Break-even only works as a live number you check, not a calculation you did once. That is an operating rhythm problem.
Owner Operating System, $250 one time
See what it would take, free →About Owner Operating SystemRelated terms
- Gross MarginGross margin is the share of revenue left after the direct cost of delivering the work.
- Marketing BudgetA marketing budget is the amount you commit to winning customers over a period, usually set as a share of revenue.
- Payback PeriodPayback period is how long it takes a new customer to pay back what they cost to acquire.
- Effective Hourly RateYour effective hourly rate is what an hour of your own time is actually worth to the business.
Common questions
+ How do I lower my break-even point?
Raise margin or cut fixed costs. Raising prices moves it faster than cutting anything, because every extra point of margin lowers the whole line.
Part of the small business glossary. All six free calculators are here.