Break-even.
aka break-even point, breaking even, BEP
The point where you stop losing money and start making it.
What it actually means
Break-even is the point where total revenue exactly covers total costs, so the business makes neither a profit nor a loss. It is usually measured in units sold or in sales value. The basic formula is fixed costs divided by the contribution per unit, which is the selling price minus the variable cost of each unit.
To use it, split your costs in two. Fixed costs stay the same whatever you sell: rent, salaries, software subscriptions. Variable costs grow with each sale: materials, packaging, payment fees. Every unit you sell earns its price minus its variable cost, and that leftover "contribution" chips away at the fixed costs. Say fixed costs are 10,000 a month, you sell at 50 and each unit costs 30 to make. Each sale contributes 20, so you need 500 sales a month to break even.
What people get wrong is treating break-even as a win. It is the floor, not the goal: at break-even you have worked all month to earn zero. It also depends on assumptions. If prices drop, discounts creep in or costs rise, the break-even point moves, sometimes a long way. Businesses often add a timeline too, asking how many months it will take to reach break-even and how much cash they need to survive until then. That second question often matters more, because a business with a sensible break-even point can still run out of money before it gets there.
Where you'll hear it
At this price we break even around month nine. If we cut the price by ten percent, that slides past a year.
Translation: the product only starts paying for itself after nine months, and a cheaper price means waiting much longer for that.
Also in pricing discussions, where teams test how many sales a price change requires, in startup pitches that promise a date for reaching break-even, in investment decisions about new equipment or locations, and in personal side projects where people ask when a hobby actually starts paying back what they spent.
The pop-culture version
You run a bake sale. Ingredients, paper plates and the stall fee cost you 60 before you sell a single thing. You price each brownie at 3. To keep the maths simple, treat all 60 as the setup cost.
The first 20 brownies just pay you back: 20 times 3 is 60. After brownie number 20 you are exactly even. You have not lost anything, but you have not gained anything either, despite standing there all afternoon.
Brownie number 21 is the first one that puts real money in your pocket. That is break-even in a nutshell: count what you spent up front, divide by what each sale brings in, and you know how many sales stand between you and profit. And if you had priced brownies at 2, you would have needed 30 sales instead, which shows how much price moves the target.
The practical rule: know your break-even number before you set a price or sign a lease. If it looks unrealistic, change the price, the costs or the plan before you spend the money.
Say it like you mean it
“We need about 500 orders a month to break even, so our real target is 650.”
It uses break-even as the floor and sets a goal above it.“We broke even this quarter, so the business is profitable now.”
Breaking even means zero profit, which is survival, not success.You will also hear "cash break-even", which ignores non-cash costs like depreciation, and "payback period", which asks how long until an investment earns back what it cost. They are related but answer slightly different questions.
A step-by-step guide to calculating a business's break-even point, separating fixed and variable costs, and using it to plan for profitability in 2026.
Decoded next
Decoded by the Kurums editorial team. Kurums Decoded translates the language of business for people who are new to it. Definitions are kept short on purpose; the serious version above goes deep. Nothing here is financial, legal or career advice.
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