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.

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.

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