Break-even point and break-even date

Sources and assumptions

Calculation assumptions

• This calculation relies on no tax scale and no regulated rate: it is a management tool. Every amount comes from your accounts or your forecast, and the result is only as good as they are.
• The turnover entered is a FORECAST, not a recorded figure. An optimistic forecast moves the break-even date without anything flagging it: run the calculation again as soon as actuals drift away from it.
• Amounts are expected excluding VAT. VAT collected is not income and VAT deductible is not a cost: including them would distort both the contribution margin and the break-even point.
• Fixed costs are assumed constant across the whole turnover range. In practice they rise in steps — a hire, extra premises, a machine — and every step crossed raises the break-even point at once.
• The break-even point expressed in days and months assumes steady activity, spread evenly over the trading days entered. A seasonal business reaches its break-even point far earlier or far later than the date shown.
• The director's pay and social contributions are only taken into account if you entered them under fixed costs. A break-even point calculated without them describes a business that does not pay the person running it.
• The figure shown is a forecast operating result: neither corporation tax nor the capital repayment of a loan is deducted from it. Reaching the break-even point is therefore not the same as reaching cash-flow balance.