If you’re running a business, there’s one number you absolutely need to know—but many business owners either don’t understand it or don’t know how to calculate it.
It’s your breakeven point—the moment when your business breaks through the threshold of losing money and starts making it, achieving financial equilibrium
Why Does Your Breakeven Point Matter?
Think of your breakeven point as your financial safety line. It tells you:
✅ How much you need to sell to cover your costs
✅ When your business will start turning a profit
✅ Whether your pricing is working for you or against you
✅ How to make smarter financial decisions with confidence
Knowing this number isn’t just useful—it’s critical for long-term success. Knowing your breakeven point is crucial in accounting, as it allows you to assess when your business will start generating profit, helping you make informed financial decisions.
What is the Breakeven Point?
Your breakeven point is when your total revenue = total expenses.
At this point, your business has covered all its costs, and every sale beyond this point is pure profit.
Put simply, it answers the all-important business question:
➡️ “How much do I need to sell to cover my costs?”
Understanding the contribution of each product or service to your overall revenue can further refine your breakeven analysis, allowing you to prioritise offerings that enhance profitability.
How to Calculate Your Breakeven Point
Here’s a simple way to work it out:
📌 Breakeven Point (Units) = Fixed Costs ÷ (Selling Price per Unit – Variable Cost per Unit)
📌 Breakeven Point (Revenue) = Fixed Costs ÷ (1 – (Variable Costs ÷ Total Revenue))
Breaking It Down:
- Fixed Costs: Think of these as the bills you have to pay no matter what—rent, insurance, salaries, subscriptions.
- Variable Costs: These are the costs that change based on how much you sell—materials, shipping, production costs.
- Selling Price Per Unit: How much you charge per product or service.
🎯 Infographic: Breakeven Point Formula Example
(I’ll generate an infographic here to make this visual and easy to follow.)
5 Reasons You NEED to Know Your Breakeven Point
1️⃣ Financial Clarity – Know exactly what sales targets you need to not be at a loss.
2️⃣ Confident Pricing – Set prices that actually cover your costs and make a profit.
3️⃣ Smarter Business Decisions – Assess if you can afford a new hire, equipment,service, or investment
4️⃣ Risk Management – Prepare for seasonal dips or market fluctuations.
5️⃣ Goal Setting & Growth – Use your breakeven point as a benchmark to track business performance and forecast future growth
How to Put Your Breakeven Point into Action
Every model of business—big or small—benefits from knowing its breakeven point. Market trends shift, costs fluctuate, and business models evolve. Regularly updating your numbers ensures you stay in control and in balance. Understanding your breakeven point helps you assess your profit margin, enabling better financial decisions and strategic planning for future growth.
🚀 Want a quick and easy way to calculate yours?
We’ve created a FREE Breakeven Calculator—just plug in your numbers and get your breakeven point calculation instantly.
🔗 Click here to access the calculator!
Need help with the analysis e of your breakeven point and using it to grow your business?
💡 Let’s chat! The Integrated CFO can help you turn these numbers into an actionable strategy to boost profitability and scale your business with confidence.
📩 Contact us today and take control of your business finances!
