Break even analysis

The break-even analysis calculates the point where your business has reached a zero balance i.e. when your income covers your expenses exactly. See Finance for more information on managing and seeking finance. Before you can calculate your break-even point, complete the following details:

  • Timeframe (e.g. monthly/yearly)
  • Average price of each product/service sold
  • Average cost of each product/service to make/deliver
  • Fixed costs for the month/year

Once you have your figures above, you can work out your break even by completing the calculations below:

  • Percentage of price that is profit - Calculate (Average price of each product/service sold minus Average cost of each product/service to make/deliver) divided by Average price of each product/service sold.
  • Number of units sold needed to break-even - Calculate Fixed costs for the month/year divided by (Average price of each product/service sold minus Average cost of each product/service to make/deliver).
  • Total sales needed to break-even - Calculate Number of units sold needed to break-even multiplied by Average price of each product/service sold.

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