Break-even point
also known as break-even point · breakeven
The level of revenue or billable work at which an agency covers all its costs - below it you lose money, above it you profit.
For example, an agency with $80,000 a month in salaries and overhead needs to bill at least that to break even. Knowing the number turns a vague worry about a slow month into a clear target for sales and utilisation.
Why it matters to your firm: the break-even point is the line every agency needs to clear each month before it makes a penny of profit. Knowing it - and how many billable hours or how much revenue it implies - turns capacity planning and sales targets from guesswork into a concrete goal.
Break-even revenue = fixed costs ÷ gross margin %. Knowing it tells you the minimum billings each month before you make a penny of profit.
Break-even revenue = fixed costs ÷ gross margin %
Roughly, the revenue needed to cover salaries and overhead.
Break-even calculator
Plug in your numbers - it updates as you type.
Prefer its own page? Open the break-even calculator
- Forgetting owner salary in fixed costs.
- Using revenue instead of gross margin in the calc.
- Treating one good month as the new baseline.