How to Conduct a Break-Even Analysis so You Don't Fly Blind Financially.
- Simon. P
- Sep 16
- 4 min read
Updated: Nov 26
Cash flow tells you what’s coming in. Profit tells you what stays.But break-even?Break-even tells you whether your business model actually makes sense.
Most founders set their prices, take on projects, or launch offers without knowing the minimum sales they need just to not lose money — let alone grow.
A proper break-even analysis gives you clarity, pricing power, and control.
This resource walks you through how to run a break-even analysis in Australia — even if numbers aren’t your thing.
What Is Break-Even Analysis and Why It Matters
A break-even analysis calculates the exact point where:
Revenue = Costs
No profit. No loss.
Just the point where your business sustains itself.
You’ll use this to:
Set profitable pricing
Determine sales targets
Validate new products/services
Decide whether a hire, new office, or new offer is financially smart
Support grant, loan, or investor applications
If you’re applying for government grants, loans, or pitching investors, break-even analysis shows you understand your numbers — and that builds credibility.
Why Break-Even Analysis Matters for Business Owners
Pricing clarity — Know what you need to charge, not what competitors charge
Smarter decisions — Launch offers or hire with data, not guesswork
Financial confidence — See whether your model is viable
Investor/lender trust — Break-even demonstrates control, not chaos
Peace of mind — No more guessing what it takes to stay afloat
Mentor Tip: If you don’t know your break-even, you’re building a business on hope. And hope is not a strategy.
What You Need Before You Start
Have these ready:
Fixed costs (rent, wages, software, insurance, etc.)
Variable costs per unit (materials, delivery, payment fees, contractors)
Your product/service price
A calculator or spreadsheet
Mentor Tip: Don’t estimate. Use data from your accounting software or bank statements — real numbers lead to real decisions.
How to Conduct a Break-Even Analysis in Australia:
Step-by-Step
Step 1: List Your Fixed Costs
These don’t change based on how much you sell.
Examples:
Rent and utilities
Salaries (not including commissions)
Software subscriptions
Insurance and licenses
Admin, accounting, legal costs
You’ll end up with a clear monthly number — the baseline cost of running your business.
Step 2: Calculate Your Variable Costs Per Unit
These increase with every sale.
Examples:
Materials or packaging
Delivery or courier fees
Payment processing fees
Contractor commissions
Manufacturing or production
This number tells you exactly what each sale costs you to deliver.
Step 3: Determine Your Selling Price
This is the amount your customer pays.
Consider:
Retail/service price
Discounts or introductory offers
GST (if applicable)
This forms your revenue per unit.
Step 4: Use the Break-Even Formula
Break-Even Units = Fixed Costs ÷ (Selling Price – Variable Cost per Unit)
Example:
Fixed costs = $5,000
Selling price = $100
Variable cost = $40
Break-even = $5,000 ÷ ($100 – $40) = 83.33 unitsYou must sell 84 units per month to break even.
Now you have a measurable target instead of a guess.
Step 5: Review and Adjust
Now experiment:
What if you increase prices by 10%?
What if you reduce delivery or supplier costs?
What happens if you bundle services?
Break-even gives you a financial sandbox to test ideas safely.
Cost of Doing a Break-Even Analysis
Tool or Service | Cost Range |
Spreadsheet (Excel/Sheets) | Free |
Xero Reports or Add-ons | Included – $25–$85/month |
Accountant Consultation | $150 – $300/hour |
Financial Templates | Free – $49 one-time |
Money-Saving Tip: Use a done-for-you calculator template to speed up the process — or book a 1-hour session with an accountant to check your numbers once done.
Common Mistakes Business Owners Make
Guessing costs or prices
Wrong data = wrong break-even = wrong decisions.
Not including hidden costs Insurance, interest, or software subscriptions sneak under the radar.
Using break-even as profit goal
Breaking even isn’t the goal — it’s the starting line.
Skipping this step entirely
No break-even = no pricing strategy = big risk.
Only doing it once
Review your analysis regularly as costs and prices change.
What to Do Right Now
✅ Need help. Book a Noize consult for help with pricing, scaling and growth strategies [noize.com.au]
✅ New to Business. Get the StartUp Deck - over 150 cards covering 10+ core business topics to help setup your StartUP with a strong foundation [thestartupdeck.com]
COMING in 2026...
✅ View our digital library of business templates that support your financial analysis of your business, from [ProDesk.com]
The Bottom Line
A break-even analysis isn’t just a financial exercise — it’s your early-warning system.
It shows you whether your pricing makes sense, whether your offer is viable, and how many sales you truly need to stay afloat. Most founders guess these numbers. The ones who win know them.
When you understand your break-even point, you stop flying blind. You start making decisions with clarity — whether that’s launching a new product, raising prices, hiring your first staff member, or scaling your operations.
Run the numbers. Adjust your model. Build with intention.
Break-even is the moment your business stops being a hope… and starts becoming a plan.
FAQs
What is the formula for break-even analysis?
Break-Even = Fixed Costs ÷ (Selling Price – Variable Cost per Unit)
How often should I do break-even analysis?
Quarterly or anytime you raise prices, launch something new, or restructure.
Can I do a break-even analysis without an accountant?
Yes. Use a spreadsheet or template — but an accountant can help you spot blind spots.
Is break-even analysis required for a business loan?
Often yes. Lenders want to know your revenue plan and how realistic your targets are.
What if my break-even point is too high?
You may need to raise prices, cut costs, or rethink your model.
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