BuildWellWhat break-even means
Your break-even point is the amount of work a month that pays for the business, with nothing left over and nothing lost. Below it, every month costs you money. Above it, each extra job’s contribution is profit.
For a contracting business, break-even is easiest to think about in jobs. You have costs that arrive every month whether you work or not, and every job you do chips in toward them. The question is how many jobs it takes.
Knowing that number changes how you look at your calendar. A slow month stops being a vague worry and becomes a specific gap: three jobs short. A price increase stops being a guess and becomes a way to need fewer jobs. And it tells you whether the business can work at all at your current prices.
The break-even formula
The calculator takes three numbers and works out three more.
- Contribution per job is the average job price minus its direct costs: $1,500 − $900 = $600.
- Jobs a month to break even is fixed costs divided by contribution: $6,000 ÷ $600 = 10 jobs.
- Revenue a month to break even is those jobs times the average price: 10 × $1,500 = $15,000.
Direct costs are the costs a job causes: its materials, the crew’s time on it, its permits, disposal and rentals. Fixed costs are everything you pay regardless of how many jobs you do.
The contribution can also be read as a percentage of the price, the contribution margin. In the example, $600 ÷ $1,500 = 40%. Each dollar of revenue brings 40 cents toward fixed costs, so $6,000 of fixed costs needs $6,000 ÷ 0.40 = $15,000 of revenue.
Worked examples
A one-truck handyman business
Monthly fixed costs: truck payment and insurance, liability insurance, phone, software, tools replacement, and $4,000 of take-home pay. Together, $6,000. The average job is $1,500 and costs $900 in materials and helper time. Each job contributes $600, so 10 jobs a month breaks even. Ten jobs is about one every two working days. Anything past that is profit.
A remodeler with bigger jobs
Fixed costs of $9,000 a month, including the owner’s pay and a small shop. The average job is $4,000 and costs $2,800 to do. Each contributes $1,200, and the business needs 7.5 jobs a month, or $30,000 of revenue, to break even. Because the jobs take a crew several days each, the owner checks whether 7.5 jobs a month fit in the schedule. If they don’t, the prices or the fixed costs have to change.
What a price increase does
Go back to the handyman. If the average price goes up by $150 to $1,650 with the same $900 of direct cost, the contribution rises from $600 to $750, and break-even drops from 10 jobs to 8 jobs. A 10% price increase cut the work needed to cover the bills by a fifth.
Break-even table
How many jobs a month you need, for a range of fixed costs and contributions per job.
| Each job contributes | $4,000 fixed | $6,000 fixed | $8,000 fixed | $10,000 fixed | $15,000 fixed |
|---|---|---|---|---|---|
| $300 | 13.34 | 20 | 26.67 | 33.34 | 50 |
| $600 | 6.67 | 10 | 13.34 | 16.67 | 25 |
| $900 | 4.45 | 6.67 | 8.89 | 11.12 | 16.67 |
| $1,200 | 3.34 | 5 | 6.67 | 8.34 | 12.5 |
| $2,000 | 2 | 3 | 4 | 5 | 7.5 |
Read across a row to see how fixed costs push break-even up. Read down a column to see how a bigger contribution per job brings it down. Contribution usually moves faster than fixed costs: a better price on every job is felt every month.
What counts as a fixed cost
| Usually fixed | Usually direct (per job) |
|---|---|
| Vehicle payments and insurance | Materials for the job |
| General liability insurance | Crew time on the job |
| Licenses and bonds | Subcontractors |
| Phone, internet and software | Permits and inspections |
| Rent, shop or storage | Dumpster or disposal |
| Your own base pay | Equipment rental |
| Office help and bookkeeping | Fuel for long drives to the job |
Some costs sit between the two. Fuel is fixed if you drive the same routes every day, and direct if one job is two hours away. Workers’ comp often scales with payroll. Put each cost where it behaves, and be consistent.
Your own pay belongs in fixed costs if you want break-even to mean "the business pays me and covers its bills." If you leave it out, break-even only tells you when the business stops losing money, and you are working for free until then.
Common mistakes
Leaving out your own pay. Then "break-even" is a month in which you earned nothing.
Counting overhead twice. If your labor rate already includes overhead, the crew cost in each job’s direct costs is the loaded rate, and those same overhead costs shouldn’t be in fixed costs too. Pick one place for each cost.
Using the best month as the average. Average job price and cost should come from a few months of real jobs, not your favorite one.
Ignoring capacity. A break-even of 14 jobs a month means little if your crew can only finish 10. Compare the number with what you can actually do.
Ignoring seasons. Many trades have slow months. If break-even is 10 jobs and winter brings 5, the summer has to carry the winter, and your prices should know that.
Using break-even when you price
Break-even gives you a floor. Every price you quote should contribute something toward fixed costs, and your average job has to contribute enough to reach break-even in a month you can actually work.
Use it to test decisions. A new truck adds a fixed cost; the calculator shows how many more jobs a month it takes. A slow-season discount lowers contribution; the calculator shows how many more jobs it takes to make up for it. A price increase raises contribution; the calculator shows how much breathing room it buys.
Then set your margin target above break-even. The profit margin calculator turns that target into a price for each job, and the labor rate calculator builds overhead into every hour you bill.
BuildWell puts your overhead and markups into every estimate, so each priced job carries its share of fixed costs before it goes to the client.
