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 agencies: 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
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- Forgetting owner salary in fixed costs.
- Using revenue instead of gross margin in the calc.
- Treating one good month as the new baseline.
What is the break-even point?
The level of revenue or billable work at which an agency covers all its costs - below it you lose money, above it you profit.
How do you calculate break-even for an agency?
Divide your fixed costs - salaries and overhead - by your gross margin percentage to get the revenue needed to cover them.
Why does break-even matter?
It is the monthly target you must clear before making any profit, anchoring sales goals, pricing and capacity planning.
How does utilisation affect break-even?
Higher utilisation means more billable revenue from the same team, so it lowers the revenue you need to break even.