![]() ![]() To break even, you’ll need to generate $200,000 in revenue. Then, to determine the break-even point in sales dollars, you calculate the following formula:īreak-even point (sales dollars) = $20,000 / $0.1Īccording to this formula, your break-even point will be $200,000 in sales revenue. The above formula calculates your contribution margin at $0.10 Fixed cost of running your business: $20,000 per quarterįirst, you’ll need to calculate the contribution margin:.You’re trying to determine the break-even point of your new business. Let’s say your company has developed a new widget. ![]() Sales volume : either unit sales or service volumeĬalculating a break-even point in dollars sold.Sales price : the selling price you’ve determined for your product or service.Variable costs : costs that fluctuate according to your sales volume and number of units sold, such as raw materials and product costs, or the costs associated with performing your service.Fixed costs : costs that remain the same regardless of your sales volume, such as lease and rental payments or insurance payments.It can help you determine your pricing strategy, cash flow and other important financial health indicators.įactors that can help determine the break-even point include: But the break-even point is an extremely useful calculation for any business looking to reach profitability.įor new businesses, break-even analysis can be a vital part of your business plan. It may sound fruitless to determine a point that doesn’t portray a win or a loss, but simply a stasis. Conversely, a break-even analysis can also help you determine how many costs you need to cut to reach profitability. Break-even analysis is important because calculating your business’s break-even point allows you to determine how much more revenue your business needs to generate before you can reach profitability. ![]()
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