Unlocking Profitability in your business

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:

• Break-even sales = £15,000 ÷ £150 = 100 sales
• If you achieve 200 sales at £150 each, total revenue is:
  200 × £150 = £30,000
• Profit = £30,000 – £15,000 = £15,000

Why It’s Important

Monitoring sales and expenses consistently helps you:

• Set achievable sales and revenue targets
• Ensure your business covers all running costs
• Plan for long-term profitability and growth

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.

breakeven_calculator