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Calculate Break Even Point 🎯



The Break Even point is a coveted destination for many companies


It’s where your revenue finally matches your costs, and profitability is on the horizon



For most companies, this can be the goal right from day 1


For startups, this can come much further down the line as they start to prepare for an exit



➡️ How do you calculate break even?


This is most commonly expressed using your Revenue, and comparing it to your Fixed Costs and Variable Costs



➡️ What are Fixed costs?


These are costs that don’t scale with each sale.


If you are operating a restaurant, a fixed cost may be the rent that you pay each month



➡️ What are Variable costs?


These are the opposite of fixed costs…


IE, they change in proportion to the level of business activity


Back to our example of operating a restaurant, a variable cost may be the cost of materials in the food you are selling



➡️ How do you calculate Break Even?


The formula is rather simple


Break Even Point = Fixed Cost / (Sales price - variable cost)



➡️ Can we go over an example?


🥪 Let’s say you sell sandwiches


🏬 Your rent is $10,000 / month


💰 You charge $10 / sandwich


💸 and your variable costs if $6 / sandwich


The formula would be $10,000 / ($10-$6) = 2,500


That means when you sell 2,500 sandwiches…


You make $10,000 in profit…which is exactly what you need to break even on your fixed costs

🤑🤑🤑




That’s my take on break even - what would you add?

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