What is break-even point in business?

  • Post category:Scribble
  • Reading time:2 mins read

The break-even point is the point where total cost and total revenue become equal in a business. Meaning the business is neither taking a loss nor making a profit.

If the cost of production is ₹500,000 and the revenue is also ₹500,000, then we can say that the business has reached its break-even point. After this point, a business generally aims to make profits. So this point is one of the most important milestones in a business.

Calculating the break-even point gives a clear understanding of the goals in a business.

  • How many units a business must sell to reach the break-even point?
  • What is the amount of sales a business requires to reach the break-even point?

Depending upon the answers an entrepreneur or an investor can forecast,

  • How long it will take for the business to break-even, and start making profits?

Because some businesses may take many years to reach the break-even point, and some may reach the break-even point within a few months. As per this calculation, entrepreneurs can strategize the business roadmap accordingly.

Here are the formulas to calculate the break-even point,

Units to be sold for break-even = Fixed Cost/(Selling Price-Variable Cost)
Amount of sales to reach break-even = Fixed Cost/((Selling Price-Variable Cost)/Selling Price)

Krisam Saha

A passionate entrepreneur xenmag.com (360° Marketing & Ads + Top 1% Specialist Network), an annoying husband, a sports fanatic and a crazy thinker. That's it. PS: I am not a writer. I am just trying to write.

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