The break-even point is the level of sales where a business’s total revenue equals its total expenses.
For example, a café has $8,000 in monthly fixed costs (rent, salaries, insurance) and earns a 40% gross margin on each sale. Its break-even point is $8,000 ÷ 0.40 = $20,000 in monthly revenue — any sales above that amount generate profit.
Why it matters: It is the essential milestone where a business stops losing money; knowing this number is critical for pricing and cost-control strategies.
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