A strong revenue month feels like a win, but revenue alone doesn't tell you whether the business is actually ahead. Your break-even point — the amount you need to sell before you start making money, not just spending it — is a far more honest number, and it's simpler to calculate than most owners expect.
The two costs that matter
Fixed costs are the expenses that stay the same regardless of how much you sell — rent, insurance, most software subscriptions, salaries. Variable costs move with sales volume — materials, packaging, payment processing fees, direct labor tied to each job or unit.
The formula
Break-even point = Fixed costs ÷ (Price per unit − Variable cost per unit). The result tells you how many units — or how much revenue — you need before every additional sale starts contributing to actual profit instead of just covering costs.
Why this number changes how you think
Once you know your break-even point, decisions that used to be guesses become math. Considering a price cut? You can calculate exactly how much more volume you'd need to make up for it. Thinking about a new hire or a bigger lease? You'll know precisely how much additional revenue that decision requires before it pays for itself.
It's not a one-time calculation
Your break-even point shifts every time a fixed cost changes — a rent increase, a new subscription, a raise. Business owners who only calculate it once, at the very start, are often working off a number that stopped being accurate months ago.
Break-even is one piece of the bigger picture — paired with your profit and loss statement, it gives you a much clearer read on where the business actually stands.
Run your own numbers with our free break-even calculator — it takes less time than reading this post. And if you'd like your break-even point recalculated automatically as your costs change, rather than re-running the math yourself every quarter, that's exactly the kind of ongoing visibility S&C Bookkeeping builds into our monthly reporting. Get in touch to see what that could look like for your business.