What is the break-even point?

Your break-even point is the moment your revenue exactly covers your costs — you're not making money yet, but you're no longer losing it. Every sale after that point is profit. It's usually expressed as a number of sales: "we need 87 customers a month to break even" or "we break even at £4,300 of monthly revenue."

Break-even analysis is the process of finding that number before you commit to something — a product launch, a new hire, an office, a price change. If the volume you need looks unrealistic for your market, the idea needs rethinking before it costs you real money.

The break-even formula

Fixed costs

What you pay regardless of how much you sell: rent, salaries, software subscriptions, insurance, loan repayments.

Variable costs

What each sale costs you: materials, payment processing fees, delivery, hosting per customer, support time.

Contribution margin

Price minus variable cost. Sell at £49 with £9 of costs per sale and each customer contributes £40 towards your fixed costs. If that number is zero or negative, no volume of sales will ever save you — the price or the cost has to change first.

A worked example

Say you run a small SaaS with £4,000 a month of fixed costs (salaries, tools, office). You charge £49 per month and each customer costs you £9 in hosting and payment fees.

1. Contribution per customer: £49 − £9 = £40
2. Break-even: £4,000 ÷ £40 = 100 customers
3. Break-even revenue: 100 × £49 = £4,900 per month

Customer 101 is your first profitable one. If you also want £2,000 a month of profit, you need (£4,000 + £2,000) ÷ £40 = 150 customers — which is exactly what the calculator above shows in the profit-target row.

How to lower your break-even point

• Raise your price. Even a small increase flows straight into contribution margin and can cut the volume you need dramatically.
• Cut variable costs. Renegotiate supplier rates, switch payment processors, or automate the manual work in each sale.
• Cut fixed costs. Every £100 off your monthly overheads is £100 less the contribution margin has to cover.
• Sell more per customer. Upsells and add-ons raise the average sale value without adding fixed cost.

What break-even analysis doesn't tell you

It assumes your price and costs stay flat, which they rarely do — discounts, annual plans and tiered pricing all blur the "average sale". It also ignores timing: a business can break even on paper every month and still run out of cash waiting for invoices to be paid. Treat the number as a floor to plan around, not a target to celebrate, and pair it with our LTV calculator to judge how much you can afford to spend winning each customer.