Understanding Work Costs as a Percentage of Sales
Knowing your costs in relation to sales is essential for figuring out how many sales your business needs before it starts turning a profit. This process is often called finding your break-even point.
Step 1: Identify Total Business Expenses
List all of your operating costs—such as rent, utilities, phone bills, staff wages, and other overheads. You can total these weekly, monthly, or annually depending on what works best for your planning. Breaking them into smaller periods (like weekly) often makes it easier to set focused, realistic sales targets.
Step 2: Work Out Your Break-Even Sales
Next, calculate how many sales you need to cover these expenses. This is your break-even point—the stage where your income equals your costs. Beyond this, every sale adds directly to your profit.
Example
Suppose your weekly operating expenses are £15,000 and the average value of a sale is £150:
Why It’s Important
Monitoring sales and expenses consistently helps you:
By clearly understanding your break-even point and tracking performance, you gain the insight needed to make smarter financial decisions and grow your business with confidence.
Here is a simple breakeven calculator for you to use.
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