The Profit Ledger

Welcome to The Profit Ledger — your go-to spot for smart bookkeeping tips, tutorials, and tools for small business success. Whether you’re a solopreneur or growing your team, we help you take control of your finances with confidence.

If you’ve ever wondered, “How much do I need to sell just to cover my costs?” — you’re asking the right question. And the answer lies in a concept every small business owner should understand: your breakeven point.

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🔍 What Is the Breakeven Point?

Your breakeven point is the moment your revenue covers all your costs — and you’re no longer operating at a loss.

It’s the threshold where:

Total Revenue = Total Costs

At this point, you’re not making a profit yet, but you’re also not losing money. Every sale after this point contributes directly to your bottom line.

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📊 Why Your Breakeven Point Matters

Understanding your breakeven point helps you:

• Set smarter pricing strategies
• Determine sales goals
• Plan for cash flow
• Evaluate new product or service ideas
• Make informed hiring and spending decisions

It’s also a key part of financial projections and loan applications — because it shows lenders you know your numbers.

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🧮 How to Calculate Your Breakeven Point

There are two main components:

1. Fixed Costs: Expenses that don’t change with sales volume
   (e.g., rent, insurance, salaries, software subscriptions)
2. Variable Costs: Expenses that change based on your sales volume
   (e.g., raw materials, shipping, commissions)

📌 Formula:

Breakeven Point (Units) = Fixed Costs ÷ (Price per Unit – Variable Cost per Unit)

This tells you how many units you need to sell to break even.

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📈 Example:

Let’s say you sell handcrafted candles for $25 each.

• Fixed Costs: $5,000/month (rent, website, marketing, etc.)
• Variable Cost per Candle: $10 (wax, jars, packaging)
• Price per Candle: $25

Breakeven = $5,000 ÷ ($25 – $10) = 334 candles

So, you need to sell 334 candles a month just to cover your costs. Sale #335? That’s profit.

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💡 What About Service-Based Businesses?

Use hours or billable clients instead of units.

For example:

• You’re a consultant charging $100/hour
• Your monthly fixed costs are $2,000
• Your variable cost per hour (software, subcontractors) is $20

Breakeven = $2,000 ÷ ($100 – $20) = 25 billable hours/month

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🚩 Common Mistakes to Avoid

• Forgetting hidden costs (freelancer platforms, merchant fees, etc.)
• Ignoring your own salary — include what you need to pay yourself in your fixed costs
• Underestimating variable costs — track real-world expenses closely

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📘 Take Action

• Know your fixed and variable costs
• Calculate your breakeven point in both units and dollars
• Reassess regularly — especially if your costs or prices change

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🔧 Free Tool

👉 Download our Breakeven Point Calculator (Excel)
Easily plug in your numbers and get instant clarity.

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Final Thoughts

Your breakeven point isn’t just a number — it’s a foundation for pricing, planning, and profitability. When you understand how much you need to sell just to break even, you gain a clear target and more control over your financial future.

Here at The Profit Ledger, we make bookkeeping and business math easy — so you can focus on growing a healthy, profitable business.