Break-Even Calculator
Calculate your break-even point to know the minimum revenue needed to cover all business costs.
Formula
Break-Even Revenue = Total Fixed Costs / (1 - Variable Cost Ratio). Variable Cost Ratio = Total Variable Costs / Total Revenue
How to Use
- 1Identify all fixed costs that stay the same regardless of revenue: rent, insurance, salaries, loan payments.
- 2Identify variable costs that increase with each job: materials, labor, subcontractors, job-specific expenses.
- 3Calculate your variable cost ratio by dividing total variable costs by total revenue from the same period.
- 4Divide total fixed costs by (1 minus the variable cost ratio) to find your break-even revenue.
- 5Divide break-even revenue by your average job size to determine how many jobs per year you need to break even.
Example
Scenario
A general contractor has $180,000 in annual fixed costs (overhead). Their variable costs (materials, labor, subs) average 65% of revenue. What is their break-even revenue?
Calculation
Fixed costs: $180,000. Variable cost ratio: 0.65. Break-even revenue: $180,000 / (1 - 0.65) = $180,000 / 0.35 = $514,286. If the average job is $35,000: $514,286 / $35,000 = 14.7 jobs per year, or approximately 1.2 jobs per month.
Result
The contractor must generate at least $514,286 in annual revenue (about 15 jobs at $35,000 each) just to break even. Every dollar above $514,286 contributes to profit at a rate of 35 cents per dollar of revenue.
Tips
- ★Know your break-even number and track monthly revenue against it — if you are behind pace, you need to increase sales activity immediately.
- ★Reducing fixed costs lowers your break-even point and makes your business more resilient during slow periods.
- ★Calculate break-even by month, not just annually, since construction revenue is often seasonal.
- ★Use your break-even analysis to set minimum pricing — never bid a job below variable cost since every such job loses money.
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Common questions about the break-even calculator
Break-even analysis tells you the minimum revenue needed to cover all costs before you earn any profit. It helps you set revenue targets, determine how many jobs you need per month, evaluate whether to hire employees or buy equipment, and make informed decisions during slow periods. Without knowing your break-even point, you are running your business blind.
Fixed costs remain constant regardless of how much work you do: office rent, insurance premiums, vehicle payments, permanent staff salaries, loan payments, and subscriptions. Variable costs increase with each job: materials, hourly labor, subcontractor payments, permit fees, dumpster rentals, and job-specific equipment rental. Some costs like fuel and phone are partially fixed and partially variable.
Lower your break-even by reducing fixed costs (cheaper office, fewer overhead employees, lower insurance through better safety records) or by improving your contribution margin (negotiating better material prices, improving labor productivity, reducing waste). Increasing prices also improves your contribution margin and lowers the number of jobs needed to break even.