How many jobs do you need to break even?

The idea

Each job leaves some profit after its direct costs. Divide your fixed monthly costs by that profit per job to see how many jobs you need.

Seeing the break-even point

Calculate yours

What to do with the answer

• If the number is higher than you can do, raise prices or cut costs.
• If it is comfortably low, you have room to grow.
• Track jobs per month against it.

Include your own wage

Add what you pay yourself to the fixed costs, or you are working for nothing.

Tip. Recalculate whenever your costs change.

A worked example

Say your fixed costs are $9,000 a month, the average job sells for $1,200 and costs $450 in materials and direct costs. Each job leaves $750 toward fixed costs, so you need 12 jobs a month to break even. The thirteenth job is where profit starts.

Ways to lower the number

• Raise your average job price, even slightly. A 5% rise helps every job.
• Cut costs you do not need, such as unused subscriptions or an over-specced vehicle.
• Reduce direct costs per job by buying materials in bulk or from a better supplier.
• Say no to low-margin work that eats your time.

Use it to plan the quiet months

Know your break-even number and you will know early when a slow month is a worry. Keep a buffer of a few weeks of fixed costs in your business account so a bad month does not become a crisis.

The formula in plain words

What changes the number

• Raise prices: a higher margin lowers break-even.
• Cut costs: lower fixed costs lower break-even.
• Change job mix: shift toward higher-margin work.
• Pay yourself a wage: include it in fixed costs or your profit is overstated.

Use it to plan quiet months

1. Calculate break-evenUse the calculator above.
2. Chart your last 12 months of salesNote months below the line.
3. Build a bufferAim for a few months of fixed costs in savings.
4. Plan marketing for slow seasonsReminders, maintenance offers and quotes in advance.
5. Review each quarterCosts and margins change.

Mistakes with break-even

• Leaving your own wage out of fixed costs.
• Using sales instead of margin in the formula.
• Treating the number as fixed when costs change.
• Ignoring seasonal dips.
• Not checking it after a price change.

A real-life scenario

A sole trader thought he was doing well because he was always busy. When he calculated break-even including a fair wage, he saw that he needed twelve jobs a month just to cover costs and was doing eleven. A modest price rise and cutting an unused subscription lowered his break-even to nine jobs, giving him a profit on the same workload.

Being busy is not the same as being profitable.

Quick answers