Ever wondered when your business will finally cover its costs and start turning a profit? That moment is known as the breakeven point – and it’s a crucial milestone for every Australian entrepreneur, side hustler, or finance manager to understand. In 2025, with higher operational costs and shifting consumer behaviour, knowing your breakeven point is more valuable than ever.
What Is the Breakeven Point?
The breakeven point (BEP) is the level of sales at which your total revenues equal your total costs. It’s the tipping point where your business stops losing money and starts making it. Go above your breakeven, and you’re in the black; fall short, and you’re operating at a loss.
In simple terms: Breakeven point = when total income exactly matches total expenses.
This isn’t just an academic exercise. With inflationary pressures and rising wages in Australia in 2025, knowing your BEP helps you:
- Set realistic sales targets
- Price products or services effectively
- Plan for growth or expansion
- Secure finance or explain your business model to investors
How to Calculate the Breakeven Point
Calculating your breakeven point is surprisingly straightforward. The classic formula is:
Breakeven Point (units) = Fixed Costs / (Selling Price per Unit – Variable Cost per Unit)
Let’s break this down:
- Fixed costs: Expenses that don’t change with output – rent, insurance, salaries, loan repayments.
- Variable costs: Costs that rise or fall with production – raw materials, packaging, shipping.
- Selling price per unit: What you charge for each item or service.
Alternatively, you can calculate the breakeven point in sales dollars (useful for service businesses):
Breakeven Sales ($) = Fixed Costs / Contribution Margin Ratio
The contribution margin ratio is: (Sales – Variable Costs) / Sales.
Real-World Example: An Aussie Café in 2025
Suppose you run a small café in Brisbane. Here’s a realistic scenario for 2025:
- Monthly fixed costs: $8,000 (rent, wages, insurance, utilities)
- Average coffee price: $5
- Variable cost per coffee: $2 (beans, milk, takeaway cup)
Plug the numbers in:
Breakeven Point (coffees per month) = $8,000 / ($5 – $2) = 2,667 coffees
If you sell fewer than 2,667 coffees a month, you’re losing money. Any cup over that is pure profit (before tax, of course). This number is crucial for goal-setting, rostering, and even negotiating with suppliers.
Why the Breakeven Point Matters in 2025
The Australian business landscape has shifted. Wage increases, new superannuation rules, and rising energy costs have all affected fixed and variable costs for SMEs. The latest tax changes and ATO reporting requirements also make accurate forecasting more important than ever.
Understanding your breakeven point in this context allows you to:
- Test the impact of price changes before you act
- Model the effect of cost increases (like higher wages or rent)
- Assess the viability of launching a new product or service
- Make informed decisions about business loans or investment
For example, if your supplier costs jump by 10%, you can recalculate your BEP instantly – and decide whether to absorb the cost, adjust pricing, or find savings elsewhere.
Common Mistakes and Pro Tips
- Ignoring semi-variable costs: Some costs (like electricity) aren’t strictly fixed or variable. Estimate conservatively.
- Underestimating fixed costs: Don’t forget insurance, equipment maintenance, or software subscriptions.
- Not updating calculations: Revisit your BEP quarterly, especially in a volatile market.
Pro tip: Use breakeven analysis to set sales bonuses, plan marketing campaigns, or negotiate with lenders. A clear handle on your BEP makes you a more credible and confident business owner.
Conclusion
Whether you’re running a suburban café or scaling up an e-commerce side hustle, the breakeven point is your financial reality check. With 2025’s economic headwinds, regularly calculating and acting on your BEP is a smart, proactive move for every Australian business. Don’t leave profitability to chance – crunch the numbers, and let your breakeven point guide your next big decision.
