When Do You Get Profitable? Your Break-Even Will Tell You

I found that many people struggle to determine when their investments will become profitable. To figure this out, you need to calculate the Break-Even Point. If you’re having trouble understanding it, this post is for you!

Simple Definition:

Breakeven means ‘Profit = Cost’

How to Calculate the Number of Units: “How many units you have to sell so your profit from these units sold will be equal to the cost you incurred”

Breakeven Units = Fixed Cost/Gross Profit per Unit

or

Breakeven Units = Fixed Cost/(sell price per unit - variable cost per unit)

  1. How to Calculate Total Target Revenue:

“How much revenue you have to generate so your profit from this revenue will be equal to the cost you incurred”:

Breakeven Revenue = Fixed Cost/Gross Profit Margin Profit

or

Breakeven Revenue = Fixed Cost/ (1 - (Variable Cost per unit/sell price per unit))

As per the Amazon selling scenario, calculating the break-even:

Breakeven Revenue:

Calculate the Breakeven Revenue: “How much revenue you have to generate so your profit from this revenue will be equal to the cost you incurred”:

Fixed costs = VA salary, Amazon subscription, rent, etc.

Total Fixed Cost = $1000

Variable costs = product purchase cost, prep per unit, storage cost, referral fee, FBA fee, etc.

Variable total cost = $6

Sale price per unit = $10

Breakeven Revenue = Fixed Cost/ (1 - (Variable Cost per unit/sell price per unit))

Breakeven Revenue = $1000/ 1 - (6 /10)

Breakeven Revenue = $1000/ 1 - 0.6

Breakeven Revenue = $1000/ 0.4

Breakeven Revenue = $2,500 Revenue to generate to hit breakeven

Breakeven Units:

Calculate the Number of Units: “How many units you have to sell so your profit from these units sold will be equal to the cost you incurred”:

Fixed costs = VA salary, Amazon subscription, rent, etc.

Total Fixed Cost = $1000

Variable costs = product purchase cost, prep per unit, storage cost, referral fee, FBA fee, etc.

Variable total cost = $6

Sale price per unit = $10

Breakeven Units = Fixed Cost/ (Sell Price per Unit - Variable Cost per Unit)

Breakeven Units = $1000/ (10 - 6)

Breakeven Units = 250 units to sell to hit breakeven

Here is what I found—the way to find the break-even points with respect to units and revenue!