Break-Even Point

What is the break-even point?

The break-even point is when your total revenue exactly covers your total costs. Below this point, you're losing money. Above it, you're making a profit. Knowing your break-even point helps you understand the minimum you need to earn to stay in business.

For contractors and small business owners, break-even analysis helps with pricing decisions and financial planning.

Calculating break-even

The basic formula considers your fixed costs and contribution margin:

• Fixed costs — Expenses that don't change with volume (rent, insurance, subscriptions)
• Contribution margin — Revenue minus variable costs per job
• Break-even revenue — Fixed costs ÷ contribution margin percentage

Example: If your monthly fixed costs are $4,000 and you keep 50% of revenue after variable costs, you need $8,000 in revenue to break even.

Using break-even analysis

Knowing your break-even point helps you set realistic revenue goals, evaluate whether to take on fixed costs (like a new lease), and understand how many jobs you need each month to stay profitable.