Break-Even Point
Definition
The level of sales at which total revenue exactly covers total costs, so you make neither a profit nor a loss.
Want a deeper explanation?
Formula
Break-Even Sales = Fixed Costs ÷ Contribution Margin %Knowing your break-even point turns a vague goal into a number. It tells you how much you need to sell before the month starts paying you, and how much a new hire or warehouse raises that bar.
It is only as good as the split between fixed and variable costs behind it. Watch for: ad spend treated as fixed, which makes break-even look lower than it really is.
Example
Monthly fixed costs are $45,000 and contribution margin is 30%. You break even at $150,000 of monthly sales.