What is the break-even point?
The break-even point is the volume or revenue at which total revenue equals total costs, so the business makes neither a profit nor a loss. Below it the business loses money; above it each sale adds profit. The same idea applies to a branch, a new territory, a service line or a single new hire.
Why it matters to a revenue leader
Break-even is the simplest way to size the risk of a new investment. Before opening a branch or adding sellers in a new region, a revenue leader should know how much monthly work it takes to cover the added fixed cost. The same math applies to a new seller: pay, benefits and expenses are the fixed cost, and the gross profit on the work they sell is the contribution. Ramp time decides how long they run below break-even.
How to calculate it
Break-even quantity = fixed costs divided by (price per unit minus variable cost per unit). Break-even revenue = fixed costs divided by the contribution margin ratio. A common mistake is leaving out fixed costs that come with the new unit, such as a branch manager or a service van.
Example
Fictitious numbersA new seller costs $12,000 a month fully loaded. The work they sell earns a 35 percent gross margin, so they break even at about $34,300 of monthly revenue delivered. If they reach $50,000 a month by month nine, they cover their cost plus about $5,500 a month.
"How many months does a new seller in our business take to reach break-even, and what does that mean for hiring timing?"
Sources
- Break Even Analysis (Corporate Finance Institute) checked 9 Oct 2026