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

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

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

The formula is rather simple

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

🥪 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

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