What is a Break-Even Point?
The break-even point is the number of units you need to sell in a given period to cover all your costs — both fixed and variable. At the break-even point, you're making zero profit but also zero loss. Every unit sold beyond this point is pure profit.
The Break-Even Formula
Break-Even Units = Fixed Costs ÷ (Selling Price − Cost per Unit)
The denominator (Selling Price − Cost per Unit) is called the Contribution Margin — it's how much each sale contributes toward covering your fixed costs.
Example: Sari-Sari Store
- Monthly rent: ₱3,000
- Utilities: ₱1,500
- Total fixed costs: ₱4,500
- Average selling price per item: ₱20
- Average cost per item: ₱14
- Contribution margin: ₱20 − ₱14 = ₱6
- Break-even: ₱4,500 ÷ ₱6 = 750 items/month
This means the store needs to sell at least 750 items per month just to break even. Anything beyond 750 items is profit.
Why This Matters for Filipino SMBs
Many small business owners in the Philippines run their businesses without knowing their actual break-even point. This leads to underpricing products, running out of cash, or not knowing when the business is actually profitable. Knowing your break-even point helps you set the right prices, plan your monthly sales targets, and make smarter business decisions.
Frequently Asked Questions
What are fixed costs vs. variable costs?
Fixed costs stay the same regardless of how much you sell — rent, salaries, subscriptions. Variable costs change with each sale — cost of goods sold, packaging, delivery fees. The break-even calculator uses fixed costs and per-unit variable costs.
Can I use this for online selling (Shopee, Lazada, Facebook)?
Yes. Include your platform fees (commission), packaging, and shipping as part of your cost per unit. Include your monthly subscription fees or advertising spend in fixed costs.
What is a good gross margin for a sari-sari store?
A typical sari-sari store targets 20–40% gross margin depending on product mix. Beverages and snacks tend to have 25–35% margins, while basic goods like rice and oil have thinner margins around 5–10%.
How do I reduce my break-even point?
Two ways: reduce fixed costs (negotiate rent, cut unnecessary expenses) or increase your contribution margin (raise prices or reduce cost per unit through bulk buying or better suppliers).