← Glossary Business glossary Break-even calculator
What is Break-even?
The point where what you sell exactly covers what it costs you to operate.
Break-even is fixed costs divided by the profit you make on an average sale. It tells you how many sales a month happen before you earn anything at all.
A worked example: £400 a month of fixed costs, £18 profit per sale, means 23 sales a month before a single pound is yours. Most people guess lower than the real figure, which is exactly why it is worth calculating rather than estimating.
Then do it again for the income you actually need to live on. That second number is the one that tells you whether the business works.
Run the numbers for real.
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