Margin Drivers AcademyModule 2 · Price for profitLesson 6 of 22
Profit & Cash 101
The Break-Even Point
The one monthly sales number you must hit.
Break-even is the sales number where gross profit exactly covers overhead: a month with $0 profit and $0 loss. Below it you lose money; every dollar sold above it is where profit starts.
How much must we sell each month just to cover the bills?
Same example company as the P<his company clears break-even by $18,367 a month, a 16.7% cushion.
Finding the number, step by step
Monthly Overhead
Costs you pay whether or not crews are working.
Indirect $5,000 + Fleet $11,850 + Admin $38,380
$55,230
Gross Margin
Each $1 of sales leaves 60.3¢ to pay overhead.
Gross Profit $66,300 ÷ Revenue $110,000
60.3%
Break-Even Revenue
Sales needed for a $0 profit month.
Overhead ÷ Gross Margin
$91,633
Daily Target
A number the crews and office can rally around.
$91,633 ÷ 22 working days
$4,165
Profit Above Break-Even
Once overhead is covered, 60.3¢ of every new dollar is profit.
$18,367 cushion × 60.3% = the P&L's Net Profit
$11,071
Margin moves the line
Same overhead, different margins. At 50%, this company would need more than its current $110,000 in sales just to break even.
The formula
Break-Even = Overhead ÷ Gross Margin %Two ways to lower it
Raise gross margin with better pricing and tighter job costs, or trim overhead. Adding sales at a thin margin raises the bar instead.
Find your own break-even
Starts with the example company's numbersYour monthly break-even
Use one month from your own P&L: sales, gross profit and the three overhead lines.