What is the break-even point?
The break-even point is the level of revenue at which your business covers all its costs — below it you lose money, above it you profit. It is the single most clarifying number a small business can know.
How to compute it
Break-even revenue = fixed costs ÷ contribution margin ratio (the share of each sale left after variable costs). A business with $20,000 of monthly fixed costs and a 50% contribution margin breaks even at $40,000 per month.
Why knowing it changes decisions
Pricing, hiring and 'can we afford this tool' all become concrete when compared against break-even. The inputs — fixed costs, variable costs, revenue — are exactly what organized payables and receivables in an ERP give you.