📊 Break-Even Calculator
Know your break-even point — because revenue without profit is just expensive exercise.
What is Break-Even?
Break-even is the revenue level where:
- Total revenue = Total costs
- Profit = $0
Below break-even, you lose money. Above it, you profit.
The Formula
Break-Even Revenue = Fixed Costs ÷ Gross Profit Margin %
Example:
- Annual overhead: $500,000
- Gross profit margin: 20%
- Break-even: $500,000 ÷ 0.20 = $2,500,000
You need $2.5M in revenue just to cover overhead.
Understanding the Components
Fixed Costs (Overhead)
Costs that don't change with volume:
| Category | Examples |
|---|---|
| Facilities | Rent, utilities, insurance |
| Personnel | Office staff, estimators (salary) |
| Equipment | Vehicles, computers, software |
| Professional | Accounting, legal, licensing |
| Marketing | Website, advertising, BD |
| Administrative | Phone, supplies, subscriptions |
Gross Profit Margin
Gross Profit = Revenue - Direct Job Costs
Gross Profit Margin = Gross Profit ÷ Revenue
Direct job costs include:
- Field labor
- Materials
- Subcontractors
- Equipment rental
- Job-specific insurance
Typical Construction Margins
| Company Type | Gross Margin | Net Margin |
|---|---|---|
| Specialty sub | 25-35% | 5-10% |
| General contractor | 12-20% | 2-5% |
| Design-build | 15-25% | 3-8% |
Calculating Your Numbers
Step 1: Calculate Annual Overhead
| Item | Monthly | Annual |
|---|---|---|
| Office rent | $3,000 | $36,000 |
| Office salaries | $15,000 | $180,000 |
| Insurance (GL, WC admin) | $2,000 | $24,000 |
| Vehicle costs | $1,500 | $18,000 |
| Professional services | $1,000 | $12,000 |
| Software/tools | $500 | $6,000 |
| Marketing | $1,000 | $12,000 |
| Misc/contingency | $1,000 | $12,000 |
| Total Overhead | $25,000 | $300,000 |
Step 2: Determine Your Gross Margin
Look at last year's financials:
- Total revenue: $2,000,000
- Direct job costs: $1,600,000
- Gross profit: $400,000
- Gross margin: 20%
Step 3: Calculate Break-Even
$300,000 ÷ 0.20 = $1,500,000
You need $1.5M in revenue to break even.
Monthly Break-Even
For cash flow planning, know your monthly nut:
Monthly Break-Even = Annual Break-Even ÷ 12
$1,500,000 ÷ 12 = $125,000/month
What If Scenarios
Scenario 1: Add an Estimator
- New salary: $80,000/year
- New overhead: $380,000
- New break-even: $380,000 ÷ 0.20 = $1,900,000
Can you get $400K more in revenue?
Scenario 2: Improve Margins
- Current margin: 20%
- Improved margin: 25%
- New break-even: $300,000 ÷ 0.25 = $1,200,000
5% margin improvement = $300K less revenue needed
Scenario 3: Cut Overhead
- Current overhead: $300,000
- Cut 10%: $270,000
- New break-even: $270,000 ÷ 0.20 = $1,350,000
$30K in cuts = $150K less revenue needed
Break-Even Per Project
Apply this thinking to individual projects:
Project Break-Even = Project Overhead ÷ Project Margin
Example:
- Estimated supervision/project management: $50,000
- Target margin: 15%
- Minimum project size: $50,000 ÷ 0.15 = $333,333
Projects under $333K won't cover their overhead allocation.
Red Flags
| Situation | Warning |
|---|---|
| Break-even > 80% of capacity | Too little margin for error |
| Rising overhead, flat revenue | Approaching trouble |
| Margins declining | Break-even moving up |
| Backlog < break-even | Need more sales |
Actions to Lower Break-Even
| Strategy | Impact |
|---|---|
| Cut overhead | Direct reduction |
| Improve margins | Multiplicative effect |
| Reduce waste | Both overhead and margin |
| Better estimating | Protects margins |
| Faster collections | Reduces carrying costs |
Interactive Calculator
Include: rent, salaries, insurance, vehicles, software, etc.
Typical: 15-25% (GC), 25-35% (specialty sub)