Understanding Your Breakeven Point
Your breakeven point is the revenue level at which total costs equal total revenue β no profit, no loss. Knowing this number before opening (or regularly during operations) helps you set realistic sales targets and evaluate whether your cost structure is sustainable.
Breakeven Formula
- Contribution Margin Ratio = 1 β (COGS Γ· Revenue)
- Breakeven Revenue = Total Fixed Costs Γ· Contribution Margin Ratio
Example: $8,000 in fixed costs with a 60% contribution margin β breakeven = $8,000 Γ· 0.60 = $13,333/month.
Frequently Asked Questions
Yes, if you're working in the business, include a realistic market salary for your role. Omitting it makes your breakeven look artificially low and masks unprofitability.
Food cost typically runs 28β35% of revenue for restaurants. Labor is separate. Total prime cost (food + labor) should ideally stay under 60β65% of revenue.
Recalculate any time fixed costs change significantly β rent increases, hiring decisions, price changes. Quarterly reviews are a good practice for most small businesses.