Break-Even Analysis: How to Know Exactly When Your Business Starts Making Money
Every business has a revenue point below which it loses money. Most small business owners don't know theirs. Here's how to calculate it in 10 minutes — and what to do with the number.
What is break-even analysis?
Your break-even point is the level of sales at which your total revenue equals your total costs — you're neither making money nor losing it. Above that point, every sale generates profit. Below it, you're burning cash.
Most small businesses run on gut feel. Break-even analysis replaces gut feel with a number.
The two types of costs
Fixed costs: expenses that stay the same regardless of how much you sell.
Variable costs: expenses that increase with each unit you sell or service you deliver.
The break-even formula
```
Break-even (units) = Fixed costs ÷ (Price per unit − Variable cost per unit)
```
Or in revenue terms:
```
Break-even (revenue) = Fixed costs ÷ Gross margin %
```
Example: a small café
| Fixed costs (monthly) | Amount |
|---|---|
| Rent | €2,200 |
| Staff (2 part-time) | €3,100 |
| Utilities | €450 |
| Equipment lease | €320 |
| Insurance + accountant | €280 |
| Total fixed costs | €6,350 |
Average ticket: €8.50. Variable cost per ticket (ingredients + packaging + card fees): €2.90.
Contribution margin per ticket = €8.50 − €2.90 = €5.60
Break-even in tickets = €6,350 ÷ €5.60 = 1,134 tickets/month
That's about 38 tickets per day, 6 days a week. Is that realistic? Now you have a concrete target.
Break-even in revenue
If your gross margin is 65%:
€6,350 ÷ 0.65 = €9,769 minimum monthly revenue
Below €9,769, the café loses money. Above it, every euro of extra revenue generates €0.65 of contribution toward profit.
What break-even analysis tells you
1. Whether your business model works: if break-even requires more customers than the market can realistically deliver, the model needs to change before you scale.
2. The impact of a price change: raise your price by €0.50, and the break-even drops significantly. Lower your price by €0.50, and you need many more customers to compensate.
3. How much runway you have: if you're currently generating €7,500/month and break-even is €9,769, you know exactly how far you are from profitability — and how urgently you need to act.
4. The effect of new fixed costs: thinking about hiring someone? Adding a new rent? Break-even analysis shows you the revenue increase needed to justify the cost.
Sensitivity analysis: what if things change?
| Scenario | Break-even revenue |
|---|---|
| Current | €9,769 |
| Rent increase of €300 | €10,231 |
| +1 part-time staff | €11,000 |
| Price raised by €0.50 | €8,640 |
| Variable costs up 10% | €10,800 |
This table shows why price increases are often more powerful than cutting costs: a small price rise has an outsized impact on break-even.
The break-even mindset
Break-even isn't a one-time calculation. Recalculate it:
A business that knows its break-even can make decisions. One that doesn't is flying blind.
How Syntra makes break-even tracking automatic
Syntra categorises every expense as it comes in — separating fixed from variable costs automatically. Your P&L dashboard shows monthly revenue vs costs in real time, so you always know whether you're above or below break-even without waiting for your accountant's year-end report.