What is the break-even point?
Definition of break-even point
The break-even point is how much your business needs to earn in sales to exactly cover its day-to-day running costs, with nothing left over.
It is not a good idea to aim to only cover your business's day-to-day running costs, as your business will almost certainly, at some point, need to invest in larger items of equipment such as a new computer or new furniture.
FreeAgent is easy-to-use accounting software for small businesses and freelancers. Get started on a 30-day free trial!
You will also want to take money out of the business for your own needs, which - apart from a director's salary - does not count as a day-to-day running cost of the business.
Plan to not only break even but to make more sales!
For more information on the break-even point check out Anna Debenham's chapter, 'The break-even point and why it matters' in our book, A Field Guide to Freelancer Finances.
Got questions? Ask Emily!
FreeAgent's Chief Accountant Emily Coltman is available to answer your questions in the comments.