Turning Break-Even into Breakthrough Growth

Written by Daniel Dubois

Running a business means constantly juggling revenue targets, expenses, and profitability goals. Before you can plan for growth, there’s one fundamental number every business owner should know: your break-even point.

Understanding your break-even point gives you a clear picture of the minimum sales your business must generate to cover all costs. Beyond this point, every additional dollar of sales contributes to profit. It’s a simple but powerful tool for decision-making - whether you’re launching a new product, setting prices, or planning expansion.

What is your Break-Even Point?

Your break-even point (BEP) is the sales volume at which total revenue equals total costs.  At this point, you’re not making a profit, but you’re not losing money either. 

Where you sell products with a specific gross margin and you’d like, to know how many units you need to sell to cover costs it can be calculated via:

Break-even point = Fixed Costs ÷ Gross Profit per unit

Where:

  • Fixed Costs = Costs that don’t change with sales (e.g. rent, salaries, insurance).

  • Gross Profit per unit = Selling Price per unit – Variable Cost per unit.

  • Variable Costs = Costs that rise with sales volume (e.g. materials, freight, commissions).

Many businesses don’t sell physical products, for these we often calculate BEP using total dollars of sales, not units.

Break-even point (sales) = Fixed Costs ÷ Gross Profit %

Where Gross Profit % = (Sales – Variable Costs) ÷ Sales

A Quick Example

Let’s say your business sells a service for $500 per job.

  • Variable cost per job: $300 (e.g. labour, consumables)

  • Fixed costs per month: $20,000 (e.g. rent, admin staff, insurance)

Step 1 – Gross Profit per job
$500 – $300 = $200

Step 2 – Break-even volume
$20,000 ÷ $200 = 100 jobs per month

You now know that you must complete 100 jobs per month just to cover your costs. Anything above this is profit.

Why Break-Even Analysis Is So Useful

  • Set simple clear sales targets: Know exactly how many Sales $, units, clients, or billable hours you need to cover your costs, and plan for your forecast profitability

  • Price confidently: Allows you to test how price changes impact profitability, focusing you on the relationship between demand and capacity

  • Plan for growth: Model “what if” scenarios, such as adding new staff or increasing overheads.

  • Control costs: See how reducing fixed or variable costs shifts your break-even point lower.

  • Mitigate risk: Especially useful for startups or new product launches.

Common Mistakes to Avoid

  • Ensuring all variable costs are captured: Separating direct costs from overheads is not always clear

  • Ignoring owner’s salary: Make sure your own remuneration is included in fixed costs.

  • Using outdated cost data: Inflation and supplier changes can make past figures misleading.

  • Forgetting seasonality: Break-even analysis works best when you also consider fluctuations that occur through the year (e.g. Christmas slowdown).

  • Not revisiting regularly: Costs and pricing evolve for you and your competition; your break-even should too.

Take the Next Step

Knowing your break-even point is the first step toward stronger financial control.

The next step is to use it strategically — to plan pricing, set sales targets, and make confident growth decisions.

The Salt team can help you:

  • Build a tailored break-even model for your business

  • Run scenario analysis (e.g. price rises, expansion plans, cost reductions)

  • Integrate break-even data into your regular reporting dashboard

Want clarity on your numbers?
Contact your Salt adviser for a no-obligation chat about building a break-even analysis that gives you real insight into your business performance.

Jenni Anderson