Startup Junction

Breakeven point is a time at which a business becomes profitable. Breakeven analysis can help business owners determine when a business will start making a profit.

How to calculate a breakeven point

To calculate your breakeven point, you should add your fixed and variable costs and subtract them from an assumed revenue so that it is equal to zero.

Revenue - (Fixed Costs + Variable Costs) = 0

By using the equation above you can determine when you will have the revenue at a certain level to breakeven.

For example, your monthly fixed and variable costs are $5000. You expect your revenue to grow to $5000/month in 6 months. Then your breakeven point will be 6 months from now.

Another example will be your monthly fixed costs are at $5000. But your variable costs are expected to be $1000 the first month and then increase by $1000 every month for six months. You will reach the revenue of $9,000/month in the 5th month and it will increase by $2,000 per month for next 12 months. It means your breakeven point will be in the 5th month as even though variable costs will go up by another $1000 in the sixth month your revenue will grow by $2000.