Question 1

What is the true break-even point?

Accepted Answer

Standard break-even only covers business costs. True break-even includes what the owner needs to actually live on, plus taxes. It's the real floor. If your revenue hits standard break-even but not true break-even, the business is technically covering its bills but you are not covering yours.

Question 2

Why does the standard break-even miss owner salary?

Accepted Answer

Because accounting treats owner salary as optional. But you are not optional. If the business cannot pay you, it is not actually profitable — you are just subsidizing it with your own time. The true break-even forces you to count yourself as a cost, the same way you would count any other employee.

Question 3

What's a realistic gross margin to use?

Accepted Answer

Service businesses typically run 60-80% gross margins. Retail runs 20-50%. Restaurants typically land around 60-70%. Use your actual numbers if you have them. If you are estimating, start conservative. A lower assumed margin gives you a higher, safer break-even target.

Question 4

What should I do if my true break-even feels too high?

Accepted Answer

Either increase your margin (raise prices or cut variable costs) or reduce fixed costs. Owner pay is often the last thing to cut — adjust the business model first. If fixed costs are lean and margin is already strong, the answer is usually to grow revenue, not to cut what you pay yourself.

True Break-Even Calculator

Frequently Asked Questions