What is my break-even point when running my business?
- Arnold Shields
- Aug 19, 2023
- 2 min read
Updated: May 14
What Is the Break-Even Point?
The break-even point is the moment when your business revenue exactly matches your total expenses. At this stage, you’re not losing money—but you’re not profiting either. It’s the starting line for profitability.
Why Knowing Your Break-Even Point Matters
Understanding your break-even point isn't just helpful—it's essential. Here's why:
Profitability Insight: It tells you how many sales you need before you make a profit.
Risk Reduction: Helps you avoid pricing or expansion mistakes that could drain your resources.
Strategic Direction: Enables smart decision-making on marketing, pricing, and budgeting.
How to Calculate Your Break-Even Point
To calculate your break-even point (BEP), you'll need:
Fixed Costs – Costs that don't change regardless of sales (e.g. rent, salaries).
Variable Costs – Costs that increase with sales volume (e.g. materials, commissions).
Unit Selling Price – How much you charge per unit.
Formula:
Break-Even Point (units) = Fixed Costs / (Unit Selling Price - Variable Cost per Unit)
Example:
Fixed Costs: $20,000/month
Unit Selling Price: $50
Variable Cost per Unit: $20
BEP = $20,000 / ($50 - $20) = 667 units
You must sell 667 units per month just to break even.
Using the Break-Even Point to Grow Your Business
Knowing your BEP isn’t the end—it’s the beginning of better business planning.
1. Increase Revenue
Launch targeted marketing campaigns, explore new sales channels, or introduce new products.
2. Optimise Costs
Identify where to trim expenses without sacrificing quality—especially recurring fixed costs.
3. Reassess Pricing
A small price adjustment can significantly shift your break-even point. Analyse the market and your margins.
4. Diversify Revenue
Add complementary products or services to tap into new customer segments or increase repeat business.
Need Help with Your Business Finances?
At Dolman Bateman, we specialise in helping business owners understand and improve their financial position. If you’d like help calculating your break-even point or want a complete business health check, get in touch with our team today.
We’ll guide you through the numbers, so you can focus on building your business.
Disclaimer:
The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. While every effort has been made to ensure the accuracy of this content at the time of publication, tax laws and regulations may change, and individual circumstances vary. Dolman Bateman accepts no responsibility or liability for any loss or damage incurred as a result of acting on or relying upon any of the information contained herein. You should seek professional advice tailored to your specific situation before making any financial or tax decision.
