Before you ask yourself how much you want to earn, there is a more urgent question: how much do you have to sell before you stop losing money? The answer is called your break-even point, and it is one of the most useful sums you can do. You do not need an accountant or a spreadsheet full of formulas: two numbers are enough.
What break-even actually means
Break-even is the moment when the money coming in covers exactly the money going out. You are not making a profit yet, but you are no longer losing. It is the waterline of your business: below it you sink, above it you start to earn. Knowing where that line sits means knowing, every month, whether you are rowing forwards or backwards.
The two numbers you need: fixed costs and margin
You only need two ingredients, and it matters that you do not mix them up.
- Fixed costs — what you pay anyway, even if you sell nothing: rent, subscriptions, salaries, insurance, your own base pay. They do not change with how much you sell.
- Margin per sale — what is actually left in your pocket on each single sale, after taking out the direct costs of that sale (materials, shipping, payment fees). It is the price minus what that sale really costs you.
Careful: margin is not the price. If you sell a product for €50 but making and shipping it costs you €30, your margin is €20, not €50. That is the number doing the work of covering your fixed costs.
The formula, in words
The break-even formula is simple: fixed costs divided by margin per sale. The result is the number of sales you need, in a month, to cover everything. Put even more plainly: every sale lays a brick (the margin) on the wall of your fixed costs; break-even is when the wall is fully covered.
A worked example
Take a business with round numbers, so you can see the whole sum.
- Fixed costs: €2,000 a month
- Margin per sale: €20
- Break-even: 2,000 divided by 20 = 100 sales a month
With those numbers, sale number 100 covers every cost of the month. From sale 101 onwards each sale puts €20 of real profit in your pocket. Sell 130 units and the 30 sales above break-even are worth €600 of profit (30 × €20). Sell 80 instead and you are still short: 20 sales missing, which is €400 you still need to cover your costs.
Why knowing your break-even changes your decisions
Break-even is not a number to file away: it is a compass for the two biggest levers you have, price and volume.
- On price: raise the price and you raise the margin. Take the margin from €20 to €25 and break-even drops from 100 to 80 sales (2,000 divided by 25). Five euros more per sale and you need 20 fewer customers a month to stay standing.
- On volume: you know your bare minimum. If your channel cannot bring you at least 100 sales a month, the problem is not selling harder: it is that your price is too low or your fixed costs are too high.
- On discounts: every discount eats margin and pushes break-even up. A discount that halves your margin doubles the sales you need just to avoid losing money.
One honest warning about taxes: everything above is money in and money out in plain terms. Taxes and social contributions depend on where you are, how you are set up and how much you make, and they change over time. The general principle holds everywhere — what matters is what is left after tax, not what you invoice — but for the real figure, check with a local accountant or tax adviser.
Break-even works for services too
If you sell time rather than products, the logic does not change: swap sales for hours or projects. With €2,000 of fixed costs and €500 of margin per project, break-even is 4 projects a month. After that you are earning. Knowing that number tells you how many clients to look for and at what price, instead of accepting any job and hoping the numbers work out.
The minimum revenue you need to survive
You can read break-even the other way round too: instead of asking how many sales you need, ask below what monthly revenue your business loses money. That number is your minimum survival revenue, and finding it is the same sum seen from another angle.
Add up all the fixed costs you have to cover each month: the business ones (rent, subscriptions, contractors) and the personal ones, meaning what you need to live on. Then divide the total by your margin percentage, that is, how much you keep on average out of every euro you take in after direct costs.
An example with round numbers, just to see the mechanism: €1,500 of business fixed costs plus €1,500 of personal expenses makes €3,000 to cover. If your margin is 50% (out of every €100 you take in, €50 stays with you), your minimum revenue is 3,000 divided by 0.50 = €6,000 a month. Below that line the business does not support you; above it, it starts working for you. Here too, the exact figure once taxes and contributions are taken into account is worth checking with a local adviser.
Break-even is the number that gives meaning to all the others: price, costs and volume all meet there. Vanteo works it out on your real numbers, if you know them, and helps you find them if you do not — so every decision starts from a figure instead of a feeling. Related: how to set the right price and the difference between revenue and profit.