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How to Calculate Break-Even Point for Your Business

  • Writer: Brian R. Schobel, CPA
    Brian R. Schobel, CPA
  • 3 days ago
  • 2 min read

Every small business owner wants to know one key thing: When will my business start making a profit? That’s exactly what your break-even point (BEP) tells you. It’s the moment when your total sales cover all your costs — no loss, no profit, just even. Knowing this number helps you make smarter pricing, budgeting, and growth decisions.


Why Your Break-Even Point Matters

Understanding your BEP helps you:

  • Set realistic sales goals — know how much you need to sell before turning a profit.

  • Price wisely — see how different price points affect your bottom line.

  • Control costs — spot where to cut expenses without hurting quality.


Step 1: Know Your Costs

You’ll need two main types of costs:

  • Fixed Costs: These stay the same no matter how much you sell (e.g., rent, insurance, salaries).

  • Variable Costs: These change depending on sales or production (e.g., materials, shipping, packaging).


Step 2: Use the Simple Formula

Here’s the classic formula to find your break-even point in units:

Break-Even Point = Fixed Costs ÷ (Selling Price per Unit – Variable Cost per Unit)

Example: If your monthly fixed costs are $5,000, your product sells for $50, and each item costs $30 to make:

$5,000 ÷ ($50 – $30) = 250 units

You need to sell 250 units just to cover your costs. Everything after that is profit!


Step 3: Turn It Into a Sales Target

If you prefer to see it in dollars: Break-Even Sales = Break-Even Units × Selling Price In this example: 250 × $50 = $12,500 in sales to break even.



Final Thoughts: Plan, Don’t Guess

Your break-even point isn’t just a one-time calculation — it’s a planning tool. Review it regularly as your costs or prices change. When you know your numbers, you can plan for profit instead of hoping for it.


Take action today: grab a calculator, list your costs, and find your break-even point — or ask your accountant to help you double-check the numbers. It’s the first real step toward financial clarity and confidence in your business.



 
 
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