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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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