Break-Even Analysis: When Will Your Business Actually Become Profitable?

Break-even is the point at which your business generates exactly enough revenue to cover all its costs — and zero profit. Every euro of revenue after that point contributes to profit. Understanding your break-even is foundational for pricing decisions, financial projections, and knowing when your business model actually works.

Fixed vs Variable Costs

Before calculating break-even, you need to separate costs into two types:

• Office rent, salaries, insurance, software subscriptions, loan repayments
• In Luxembourg: expect fixed costs of €15,000–€40,000/month for a small team

• Cost of goods sold (COGS), transaction fees, shipping, commissions
• Expressed as a percentage of revenue or per unit

The Break-Even Formula

Break-even revenue = Fixed costs ÷ Gross margin percentage

If your fixed costs are €20,000/month and your gross margin is 60%: Break-even = €20,000 ÷ 0.60 = €33,333/month in revenue

This means you need to generate €33,333 in monthly revenue before you make a single euro of profit.

Break-even units = Fixed costs ÷ (Price per unit − Variable cost per unit)

If you sell a product at €100 with €40 variable cost and €20,000 fixed costs: Break-even = €20,000 ÷ (€100 − €40) = 333 units/month

Margin of Safety

Once you know break-even, calculate your margin of safety:

Margin of safety = (Actual revenue − Break-even revenue) ÷ Actual revenue × 100

If you're generating €50,000 and break-even is €33,333: Margin of safety = (€50,000 − €33,333) ÷ €50,000 = 33.3%

This means revenue can drop by 33% before you start losing money. Healthy businesses typically target a 20–40% margin of safety.

Improving Your Break-Even Position

• Raise prices: if demand allows, even a 10% price increase dramatically improves break-even
• Reduce variable costs: renegotiate supplier contracts, improve operational efficiency
• Reduce fixed costs: remote work, shared office, renegotiating software contracts
• Increase gross margin: move up the value chain, productise services

Find Your Break-Even Point

[👉 Use the Break-Even Calculator](/calculators/break-even)

Enter your fixed costs, revenue, and variable costs to calculate your break-even in both revenue and units — with a visual chart showing your path to profitability.