Break-Even Point

Explanation

The "Break-Even Point" is the minimum revenue needed to cover all costs. It's the moment where you neither lose nor make money. ### Fixed vs Variable Costs - **Fixed Costs**: Rent, salaries, insurance. They stay the same whether you sell 0 or 1000 units. - **Variable Costs**: Raw materials, shipping, commissions. They increase with sales. ### Formula **Break-Even ($) = Fixed Costs / Contribution Margin Ratio**. Or simply: How many units must I sell to cover my fixed costs with the profit from each unit? ### Utility Essential for any Business Plan. It tells you "from which day of the year do I start making a profit".

Examples

• Rent $1000. I sell pizzas for $10 (Profit $7).
• I need to sell 143 pizzas (1000/7) to cover rent. The 144th is pure profit.

FAQ