Small Business Coaching: What is your break-even?

How do you even know what it might be...

To put it bluntly, every sale you make, has an expected profit built into it. The total amount of sales for a month yields an expected gross profit. This gross profit needs to be large enough to cover all of the sales, general and administrative expenses (not the purchases of products for re-sale). This bucket of expenses is commonly know as your overhead, or the SG&A.

So, the break-even point is the point at which the value earned is equal to the total cost. For a business, it's extremely important to know how much revenue is required to just pay for the operation for the period measured, like a month or year.


Break-even may be expressed in terms of accounting, profit and loss, or it may be expresses in terms of cash flow, which is when cash collected is equal to disbursements.

Understanding the break-even point for a business, product or other unit of business allows management to make better management decisions about pricing, marketing, sales, production and other business matters. Before you increase your overhead or SG&A, you must be able to project that your gross margin would grow to cover your expenses.

You must now understand the concept of gross margin, what impacts that and how you can manage and calculate it.