Break-even is the revenue number where your business stops losing money and starts making it. It is one of the most important numbers in any business — and one of the most commonly unknown. This calculator makes it visible.
Fixed costs happen every month whether you do one job or twenty: rent, insurance, loan payments, phone, software. Variable costs only exist when you do work: materials, direct labor, subcontractors. The break-even formula uses the contribution margin — what is left from each job after variable costs — to cover fixed costs.
What this number tells you: If your break-even requires 9 jobs per month and you are consistently closing 7, you are burning through savings or credit. If you are closing 15, you have healthy operating leverage.
Break-even analysis finds the revenue level where total costs equal total revenue. Below break-even you lose money; above break-even every additional dollar of revenue at your contribution margin is profit.
Break-even revenue = Fixed Costs divided by Contribution Margin Ratio. Example: $8,000 fixed costs at 45% contribution margin = $8,000 / 0.45 = $17,778/month break-even.
Contribution margin is what remains after paying variable costs — the amount that contributes to covering fixed costs and eventually profit. A job generating $2,000 with $1,100 in direct costs has a $900 contribution margin.
Recalculate any time fixed costs change materially — new equipment lease, different insurance, added staff. Also recalculate when average job value or variable cost ratio changes significantly.
Most financial advisors suggest targeting 10-20% net profit above break-even. A business at break-even is solvent but not generating a return on the owner's time and invested capital.
Rent, insurance, loan payments, software, phone, utilities
Materials, direct labor, subcontractors