How to calculate your break-even point
1. What is the break-even point?
The break-even point is where total revenue equals total costs: you make no profit and no loss. Every unit sold beyond it adds real profit.
2. Formula
- Fixed costs are paid whether you sell or not: rent, fixed salaries, equipment depreciation.
- Variable costs rise with each unit sold: ingredients, cups, packaging, card fees.
Break-even units = Fixed costs ÷ (Price − Variable cost per unit)
Break-even revenue = Break-even units × Price
3. Example: a take-away coffee cart
- Fixed costs (pitch, cart depreciation, electricity): 5,000,000 ₫ per month.
- Average price: 20,000 ₫ per cup; variable cost (coffee, milk, cup, bag): 8,000 ₫.
- Margin per cup: 20,000 − 8,000 = 12,000 ₫.
- Break-even: 5,000,000 ÷ 12,000 = 417 cups per month, about 14 cups a day.
Frequently asked questions
How can I lower my break-even point?
There are three levers: cut fixed costs (negotiate rent, optimise staff shifts), lower the variable cost per unit (better suppliers, less waste), or raise your selling price if your brand and location allow it.
I have reached break-even, so why am I still short of cash?
Accounting break-even is not the same as cash-flow break-even. Cash can be tied up in inventory or unpaid customer invoices, and loan principal repayments are not part of the break-even costs.
Should I include my own salary in fixed costs?
Yes, if you work in the business full time. Otherwise the calculator will show a profit that is really just payment for your own time.