Fixed costs
Rent, insurance, software, vehicles, your own draw. Everything that arrives whether or not you invoice anyone.
Average invoice value
Variable cost per job
Materials, subcontractors, delivery: the costs that only exist because the job does.
Profit you want on top
Break-even is survival. This is the number that makes it worth doing.
Jobs you actually invoice
Used to show your margin of safety.
Payment terms
You break even when the money arrives, not when the invoice goes out.
Break-even
8 jobs
a month, at $800 an invoice
jobs = 4,000 / (800 - 300) = 8
On Net 30 terms you are funding a month of costs before the first payment lands.
What is the break-even point?
The point where what you earn covers what you spend, and the business stops costing you money. Below it you are funding the gap yourself. Above it, every additional job contributes profit rather than survival.
The break-even formula is short:
- Break-even units = fixed costs / (price - variable cost per unit)
- Break-even revenue = fixed costs / contribution margin, where the contribution margin is that same difference expressed as a percentage of the price.
On $4,000 of monthly fixed costs, an $800 average invoice and $300 of materials a job, each job contributes $500, so eight jobs a month covers everything. The ninth is the first that pays you.
Fixed costs, variable costs, and why the split matters
Break-even analysis only works if costs are sorted correctly, and the line is not always obvious.
Fixed
Rent, insurance, vehicle payments, software, accountancy, phone, and your own draw. They arrive whether you invoice one job or thirty.
Variable
Materials, subcontractors, delivery, card fees, consumables. They exist only because the job does.
The awkward ones
A part-time employee is fixed until you cut hours. Fuel is variable but rarely tracked per job. Put them where they behave, not where the accounts file them.
The most common mistake is leaving your own wages out of fixed costs. A break-even that assumes you work for nothing is not break-even, it is the point where the business survives and you do not get paid.
Break-even in invoices, not units
Unit break-even suits a business selling one product. Most people who invoice for a living sell time and jobs of varying size, so the useful version uses your average invoice value: how many jobs a month before the business is level.
That number is worth knowing because it is checkable. Eight invoices a month is a target you can hold against a calendar. A revenue figure of $6,400 is harder to feel until the month is over.
- If your invoices vary widely, run the calculator at your smallest typical value as well. The answer tells you how bad a quiet month can get.
- Raising your average invoice value moves break-even faster than winning more work, because it lifts the contribution on every job you already have.
- Check the price you are using is the price you actually collect, after discounts.
You break even when the invoice is paid, not when it is sent
Every break-even calculation quietly assumes the money arrives the moment the work is done. On Net 30 terms it does not, and the costs carry on regardless.
At $4,000 of monthly fixed costs, thirty day terms mean you are funding roughly a month of costs beyond the point the spreadsheet calls break-even, and sixty day terms mean two. That gap is why profitable businesses run out of cash, and why break-even on paper is a floor rather than a finish line.
- Ask for a deposit on larger jobs so the work is part-funded before it starts.
- Invoice the day the work is finished. Days spent not invoicing are added directly to the wait.
- State terms and a late fee on every invoice. The late fee calculator shows what the delay is actually costing you.
- Set the payment terms above and the panel shows the cash you are carrying at break-even.
Moving your break-even point
Three levers, and they are not equally effective.
Raise prices
The fastest. A 10% price rise on an $800 invoice adds $80 of pure contribution, dropping break-even from eight jobs to seven.
Cut variable costs
Also effective, and usually harder. Every dollar saved on materials is a dollar of contribution.
Cut fixed costs
Slowest to change and often the largest number. Worth reviewing annually rather than in a crisis.
Chasing volume is the lever people reach for first and the weakest of the three, because more jobs at a thin contribution also means more materials, more travel and more invoices to chase. Check the contribution first with the profit margin calculator, then price the work with the quote generator and bill it with the invoice generator.
Break-even questions, answered
What is the break-even formula?
Fixed costs divided by the contribution per unit, where contribution is the selling price minus the variable cost. On $4,000 of fixed costs with $500 of contribution a job, break-even is eight jobs.
How do I calculate break-even in sales dollars?
Divide fixed costs by the contribution margin as a decimal. At a 62.5 percent contribution margin on $4,000 of fixed costs, break-even revenue is $6,400.
What is contribution margin?
What one sale leaves towards the costs that arrive anyway. Selling price minus variable cost, either as a dollar figure or as a percentage of the price. It is the number break-even is built on.
What counts as a fixed cost?
Anything that arrives whether or not you work, including your own wages. Leaving your pay out of the list is the most common way a break-even figure comes out too low: it then describes a business that survives while you work for nothing.
What counts as a variable cost?
Costs that exist only because the job does: materials, subcontractors, delivery, card processing fees and consumables. If it disappears when the job is cancelled, it is variable.
How many invoices do I need to send to break even?
Divide your fixed costs by the contribution on an average invoice. At an $800 average invoice with $300 of materials, each one contributes $500, so $4,000 of monthly costs needs eight invoices a month.
What is the margin of safety?
How far above break-even you are trading, as a percentage of sales. Twelve jobs against a break-even of eight is a 33 percent margin of safety, which is roughly how much work you could lose before the business stops covering itself.
How long does it take to break even?
For a business with steady costs, as long as it takes to reach the volume above. Where you have spent money up front, add the startup cost to fixed costs and the answer becomes how many jobs until you are square, which is a payback period rather than a break-even point.
Does break-even account for payment terms?
Most break-even calculations do not, which is why they mislead. You break even when the money arrives, so on Net 30 terms you are funding about a further month of costs beyond the point the arithmetic calls break-even.
Why do lenders and business plans ask for break-even?
Because it is the shortest honest test of whether a plan works. It shows the volume the business must reach to survive, which makes the sales forecast checkable rather than optimistic.
What if my products have different prices?
Use a weighted average selling price and variable cost across your usual mix, or run the calculation on your average invoice value. Where the mix is very uneven, run it on the smallest typical job as well to see how bad a quiet month gets.
Can a business ever be unable to break even?
Yes. If the variable cost is higher than the price, every sale loses money and volume makes it worse rather than better. Fix the price or the cost first, because no amount of work fixes a negative contribution.
Is the break-even calculator free?
Yes. No signup and nothing uploaded: every figure is worked out in your browser and gone when you close the tab.