Break Even Calculator

This is the minimum level of sales that you need to make, to cover all your business costs and start to get into a profitable situation. It should be a measure in your management accounts. Assuming you know your fixed costs (e.g. salaries, rents, rates – often referred to as overheads) and variable costs (these relate to the cost of production and vary with quantity e.g. raw materials) within the business, the simplest way to work this is as follows:

Work out your gross profit (GP) = Total sales – Variable Costs

Calculate your GP percentage = Gross Profit ÷ Sales

Break Even Point = Fixed Costs ÷ GP Percentage

So for example, if your turnover is £500k, your fixed costs are £100k and your variable costs are £200k:

GP = £500k – £200k = £300k

GP percentage = £300k ÷ £500k = 60%

Break Event Point = £100k ÷ 60% = £167k

The graph below illustrates an alternative way of representing the break even point. With everything below this level being a loss and everything above a profit; hence its importance:

You can use the calculator below to work out your break even point.

(Double click on boxes to change values so they are applicable to your business)