Do you know the exact moment your business starts making money?
That point, when your revenue covers all of your expenses and you’re no longer operating at a loss, is called your break-even point (BEP). That number is the tipping point between understanding your business and the needs of your customers. For solo business owners and service-based professionals, understanding your break-even point is especially important. If you’re running a business in a flex space like Elevate Office Suites, where overhead might be lower but still consistent, this number can guide your pricing strategy, shape your monthly goals, and give clarity to what it takes to grow the profitability of your business.
Let’s break it down.
The break-even point (BEP) is the point at which your business’s total revenue equals its total expenses. You’re not losing money, but you’re not making a profit yet either. It’s the baseline you need to hit. Once you pass your break-even point, every additional sale starts to generate profit.
Think of it this way. Every business has fixed costs (like rent, insurance, or software subscriptions) that don’t change month-to-month, and variable costs (like supplies or materials) that increase with each sale. Your break-even point tells you how many units you need to sell. Or how much revenue you need to bring in to cover both.
There are two ways to calculate it:
Break-Even Point in Units:
This formula tells you how many individual products or services you need to sell to break even. For example, if a hairstylist charges $60 per haircut, spends $20 on products per client, and has $900 in monthly fixed costs, they’d need to complete 23 haircuts to break even.
The contribution margin is the percentage of each sale that goes toward covering fixed costs and generating profit. This version of the formula is especially helpful for businesses that offer a variety of services or packages at different price points.
Understanding your break-even point gives you a clear benchmark for goal setting, helps you price your offerings more strategically, and ensures you’re on a sustainable path to profitability.
Let’s break down the break-even point with an example that might feel familiar—especially for salon professionals working in a suite at Elevate. A salon suite tenant pays $900/month for rent and spends $20 in supplies per client. They charge $60 per haircut.
This is the amount you pay no matter how many clients you serve. In this case:
These are the costs that increase with each client, like shampoo, color, and disposable supplies.
This is how much you charge per service.
This is how much profit you make from each service before paying fixed costs.
Contribution Margin = Price – Variable Cost = $60 – $20 = $40
Now divide your fixed costs by the contribution margin:
Break-Even Point (Units) = $900 / $40 =22.5
So, you’ll need to complete at least 23 haircuts per month just to break even.
Everything after that? That’s profit. Knowing this number helps you set realistic monthly goals, evaluate whether a price increase is needed, and determine if now’s the right time to take on additional expenses or expand your services.
Once you know your break-even point, it becomes more than just a number. It becomes a tool you can use to guide day-to-day decisions and long-term growth.
Your break-even point gives you a clear baseline for how much you need to sell each month just to cover your costs. This helps you set realistic targets, avoid underpricing yourself, and keep your business on track during slower months. For example, if you know you need to book 23 haircuts to break even, you can plan marketing or promotions to fill your calendar beyond that.
If your break-even point feels too high, that’s a sign something needs to shift. You might:
Thinking about renting a larger suite, hiring help, or adding a new service? Use your break-even formula to run the numbers first. If expanding your space increases your fixed costs, how many additional sales will you need to cover that increase—and is that realistic for your current client base?
Your break-even point isn’t set in stone. If your costs go up—whether it’s due to inflation, increased utility bills, or rising supply prices—your break-even point will shift too. Regularly reviewing your numbers helps you stay ahead of those changes and avoid being caught off guard.
Even though break-even analysis is a powerful tool, it's only as useful as it is accurate. Here are a few common mistakes that can throw off your numbers—and how to avoid them:
One of the biggest pitfalls is forgetting to include all of your business expenses. Fixed costs aren’t just rent—they can also include things like insurance, software subscriptions, business licenses, and marketing expenses.
Similarly, variable costs go beyond supplies. Think about things like credit card processing fees, packaging, or even complimentary items you give to clients. The more accurate your inputs, the more reliable your break-even point will be.
Many businesses, especially in service and retail, have busy and slow seasons. If your revenue fluctuates throughout the year, be careful not to base your break-even calculations on peak-season numbers. It’s smarter to plan for the slower months so you’re not caught off guard by a dip in income.
A common mistake for solopreneurs and small business owners is not factoring in what they need to pay themselves. If your break-even point only covers business expenses and doesn’t include your personal income, you’re not truly breaking even—you’re working for free. Always include your salary or personal draw in your fixed costs.
Your business isn't static—your costs, prices, and services will change over time. That means your break-even point will, too. Reviewing your BEP every quarter or when you make significant changes (like raising prices, moving spaces, or launching new services) keeps your strategy grounded in real numbers.
Understanding your break-even point gives you more than just a number. It gives you clarity, control, and confidence in how your business is performing. It helps you make informed decisions about pricing, budgeting, and when it’s time to scale. For small business owners and entrepreneurs, especially those managing flexible lease spaces or juggling multiple roles, this simple financial benchmark can offer peace of mind in an otherwise unpredictable environment.
Make it a habit to review your break-even point regularly, especially when your costs, services, or prices change. That small effort can save you from unexpected surprises and keep your business on track for sustainable growth.
Need help running your numbers? You can try out this free, easy-to-use Break-Even Calculator from the U.S. Small Business Administration (SBA) to get started.