If I asked how much you need to sell this month just to cover your costs, could you answer?
That's your break-even number, and it changes how you think about slow months, discounts, and new hires.
The simple formula:
Monthly fixed costs ÷ gross margin % = break-even sales
Fixed costs are the bills that come no matter how busy you are: rent, insurance, vehicle payments, software, your office help, your own base pay.
Gross margin is what's left from each sales dollar after the direct costs of the job (materials, subs, job labor), shown as a percentage.
Hypothetical: a small contracting company has $12,000 a month in fixed costs and keeps 40 cents of every sales dollar after job costs. $12,000 ÷ 40% = $30,000 a month in sales just to break even. The first $30,000 keeps the lights on. Profit starts after that.
Once you know the number, a lot gets clearer:
A 10% discount needs a lot more volume to make up for itself.
A new hire raises your fixed costs, so it raises your break-even too.
A slow month is easier to plan for when you know exactly how slow is too slow.
You can only find this number if your books separate job costs from overhead. If yours don't yet, send me a message through the Contact page and we can set it up.
— Rachel, Two Miles LLC