Break-even point: what it is and how to calculate
The break-even point is the sales level where revenue exactly covers all costs (fixed and variable) — below it there's a loss, above it profit begins.
How to calculate
Break-even = fixed costs ÷ contribution margin (%). If fixed cost is $30,000/month and contribution margin is 60%, the restaurant must make $50,000 to break even.
- BE = fixed costs ÷ contribution margin %
- Below: loss; above: profit
- Minimum monthly revenue target
Why it matters
Knowing the break-even sets a minimum sales target and helps decide prices, hours and promotions — you know how much you must sell before making a profit.
FAQ
What is the break-even point for?
To know the minimum revenue that covers all costs — below it the restaurant operates at a loss.
How do I lower the break-even point?
By cutting fixed costs or raising contribution margin (better price, lower variable cost).