How to Calculate Your Break Even Point

Your break-even point is the level of revenue at which your Calgary business covers all its costs — no profit, no loss. Knowing this number is fundamental for pricing decisions, budgeting, and understanding how much runway you have in a slow month.

The Formula

Break-even point = Fixed Costs / (1 - Variable Cost Percentage)

Let's break that down:

• Fixed costs are expenses that stay the same regardless of revenue: rent, insurance, loan payments, base salaries, and software subscriptions.
• Variable costs are expenses that change with revenue: materials, commissions, shipping, and credit-card processing fees.
• Variable cost percentage is your total variable costs divided by total revenue.

An Example

Suppose your Calgary business has $8,000/month in fixed costs and variable costs equal 40% of revenue. Your break-even calculation is: $8,000 / (1 - 0.40) = $8,000 / 0.60 = $13,333 per month. You need to generate at least $13,333 in monthly revenue to cover all costs.

Why Break-Even Matters

Knowing your break-even point helps you in several ways: set minimum revenue targets, price products and services to ensure profitability, evaluate the impact of adding fixed costs (like hiring or renting a larger space), and understand how much of a downturn your business can survive.

Break-Even Per Product or Service

For businesses with multiple products or services, calculating break-even by offering helps you identify which lines contribute the most to covering fixed costs and which may actually be dragging profitability down.

Track It Monthly

Your break-even point isn't static. As fixed costs change (new hires, rent increases) and variable cost percentages shift (supplier price changes), your break-even moves. Recalculating it monthly as part of your financial review keeps you informed.

Castle Helps You Understand Your Numbers

Castle Bookkeeping doesn't just record transactions — we help Calgary business owners understand their financial statements and make better decisions. Contact us for a free consultation.