How much revenue does your business need to break even?
Enter fixed costs and the percentage of each revenue dollar available to cover those costs. The calculator returns the sales level where those margin dollars equal fixed costs.
The Small Business Administration defines break-even as the point where total cost and total revenue are equal, with no loss or gain. The SBA explains the concept in its startup-cost and break-even guide. This tool estimates that revenue floor. It does not set a bid price, forecast cash timing, calculate tax, or add an owner profit target.
The input is labeled gross margin because that is common contractor reporting language. Technically, the sales-dollar break-even formula uses contribution margin. Your reported gross margin works only when the direct job costs beneath gross profit represent the variable costs that rise with revenue and fixed overhead is kept above that line.
How to use the break-even calculator
- Choose one time period: month, quarter, or year.
- Total the fixed costs for that same period.
- Enter the contribution-margin percentage available after variable or direct job costs. Use reported gross margin only when its cost classifications fit that definition.
- Keep the margin above 0% and below or equal to 100%.
- Read the revenue floor, then compare it with backlog, sales capacity, cash needs, and the profit target.
The SBA sales-dollar formula is fixed costs divided by contribution margin. Its official guide publishes that formula directly. This calculator performs the same division after converting the entered percentage to a decimal.
Break-even revenue = fixed costs ÷ (margin % ÷ 100)
The SBA states that break-even point in sales dollars equals fixed costs divided by contribution margin. See the federal guide and its unit-based companion formula.
At $90,000 of fixed costs and a 30% margin, break-even revenue is $300,000. Thirty percent of $300,000 is $90,000, so the margin dollars cover the fixed-cost load. If margin falls to 25%, the same fixed costs require $360,000 of revenue. Lower margin means more sales are needed to carry the same fixed costs.
Gross margin, contribution margin, and markup
The SBA defines contribution margin as the difference between sale price and the cost to make the product, expressed as a share of sale price. Its ratio formula is sale price minus variable cost, divided by sale price.
Contractors often use gross margin similarly: revenue minus direct job cost, divided by revenue. That works in this calculator when direct job cost captures the costs that vary with the work and fixed overhead sits outside gross profit. If field supervision, equipment, or labor is classified differently in your books, the reported percentage may not function as a contribution-margin ratio. Align the cost definitions before trusting the output.
Gross margin is not markup. Margin uses revenue as the denominator; markup uses cost. Do not enter a markup percentage. For a masonry job, the brick calculator can establish unit quantity, but supplier cost, labor, equipment, and other direct costs must be priced before that job informs margin. Use the job costing calculator to compare estimated and actual direct costs.
Worked example: monthly and annual break-even
A contractor carries $18,000 in monthly fixed costs. At a 30% contribution margin:
- Monthly break-even revenue = $18,000 ÷ 0.30 = $60,000.
- Annual fixed costs = $18,000 × 12 = $216,000.
- Annual break-even revenue = $216,000 ÷ 0.30 = $720,000.
If margin improves to 36% while annual fixed costs stay at $216,000, annual break-even revenue falls to $600,000. The overhead did not move; each revenue dollar supplied more margin to cover it. This is a sensitivity example, not a promise that a price increase or cost cut will leave volume unchanged.
What break-even revenue does not tell you
Break-even means the entered margin dollars cover the fixed costs included in the model. It does not automatically cover omitted debt service, owner distributions, income taxes, growth hires, equipment replacement, working-capital reserves, retainage, or slow collections.
The SBA cautions that break-even is an estimate for business planning and lender viability, not a perfectly accurate accounting or financing result before all costs occur. That limitation appears in the same federal guide. Add profit and cash targets as separate lines instead of calling break-even a complete budget.
Keep fixed costs and revenue in the same period
The formula works monthly, quarterly, or annually only when both inputs use the same period. Monthly fixed costs produce monthly break-even revenue. Annual fixed costs produce annual break-even revenue. Do not divide annual overhead by a monthly margin and read the result as a monthly sales target.
Fixed costs are costs incurred during a period that do not change with increases or decreases in production or services. The SBA gives rent, salaries, property taxes, insurance, interest, and depreciation as examples. Convert quarterly or annual bills to the selected planning period and document the allocation.
Check whether the required revenue is physically achievable
Put the result next to backlog, average job size, close rate, crew throughput, estimator capacity, and seasonality. A revenue floor above realistic production capacity is a management warning, not a target the team can solve through motivation alone.
If capacity cannot support break-even revenue, the levers are structural: reduce fixed costs, improve contribution margin, change mix, raise productive capacity, or redesign the operating model. Before changing assumptions, reconcile job costs between accounting and field systems so the margin input is not built on missing labor or materials.
Break-even revenue reference
| Input or result |
Definition |
Common mistake |
| Fixed costs |
Period costs to be covered by margin dollars |
Mixing monthly and annual amounts |
| Margin input |
Contribution-margin ratio; contractor gross margin only when classifications align |
Entering markup |
| Break-even revenue |
Revenue where modeled margin dollars equal modeled fixed costs |
Calling it a profit target |
| Profit target |
Additional margin dollars above fixed costs |
Leaving it out of sales planning |
| Capacity check |
Operational ability to produce required revenue |
Treating a formula result as automatically achievable |
Break-even calculator FAQ
How do I calculate break-even revenue?
Divide fixed costs by the contribution-margin ratio as a decimal. At $90,000 of fixed costs and 30% margin, break-even revenue is $300,000.
What fixed costs should I include?
Include period costs that the modeled margin must cover, such as rent, applicable salaries, insurance, software, interest, and depreciation. Keep the accounting period consistent.
Is gross margin the same as markup?
No. Margin is measured against revenue; markup is measured against cost. This calculator requires a margin percentage, not markup.
Does break-even revenue include a profit target?
No. Break-even covers the fixed costs entered in the model. Add desired profit and cash needs above that floor.