Calculator
Break-Even Revenue Calculator
How much do you need to sell each month before you make a dollar? Overhead divided by gross margin. The answer is usually higher than the owner thinks.
Include owner compensation at a market rate.
Results
- Break-even revenue (monthly)
- $578,125
- Revenue for $40,000 monthly profit
- $703,125
- Current monthly operating profit
- $23,000
- Margin of safety
- 11.1%
Annual: $6,937,500
How far revenue can fall before you lose money.
Illustrative only. Break-even assumes gross margin holds across the revenue range, which it rarely does perfectly.
Break-even is the number every owner should know and few can state. It is fixed overhead divided by gross margin percentage: the revenue at which contribution exactly covers rent, office salaries, insurance, software, trucks, and the owner's draw. Below it, every month is a loan from the balance sheet. Above it, the margin on incremental sales drops to the bottom line.
This calculator computes monthly and annual break-even, the revenue needed for a profit target, and the margin of safety between your current revenue and break-even. When the margin of safety is thin, small changes in volume or margin become large changes in cash.
How to read the result
- Break-even revenue equals fixed overhead divided by gross margin percentage.
- Revenue for a profit target equals (fixed overhead plus target profit) divided by gross margin percentage.
- Margin of safety equals (current revenue minus break-even revenue) divided by current revenue.
- Fixed overhead should include the owner's compensation at a market rate, or the break-even is understated.
FAQ
Questions about this calculator
What belongs in fixed overhead?
Costs that do not change with volume in the short run: rent, office and management salaries, insurance, software, vehicle leases, utilities, professional fees, marketing, and interest. Field labor and materials are direct costs and belong in gross margin, not overhead.
My gross margin varies by month. Which do I use?
Use a trailing twelve-month average for the baseline, then rerun the calculator with your best and worst month to see the range. Seasonal businesses should compute break-even for the slow season separately.
What if I am below break-even?
You have three levers: raise margin (price and cost), raise volume, or cut overhead. Most owners reach for volume first because it is the most fun. Margin is usually faster and cheaper. A fractional CFO's first month is often spent on exactly this question.
Keep reading
From the number to the decision
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