In short: The break-even point is the level of sales at which revenue exactly covers all your costs, with no profit and no loss.
The full guide: How to open a shop in Jordan
Work it out now: Break-even
The break-even point is where your revenue equals your total costs. Below it you lose money, above it you start making profit. You need two numbers: monthly fixed costs such as rent and salaries, and the profit per unit after its variable cost.
The two break-even formulas
| Form | Formula | Café example |
|---|---|---|
| In units | Fixed costs ÷ (selling price - variable cost per unit) | 2,400 ÷ 1.200 = 2,000 cups a month |
| In dinars | Fixed costs ÷ margin ratio | 2,400 ÷ 60% = JOD 4,000 a month |
This calculation is most useful before opening a new shop or café in Amman or Irbid, and when you are weighing a rent increase or one more hire. Once you know your daily break-even figure, make it your sales target. In Ghalleh you set a daily target, follow your progress through the day, and get a notification the moment you reach it.
The figure is an estimate, because you do not sell one item at one price. Use the average margin across your products and revisit it every few months. Any rise in fixed costs pushes the break-even point up immediately, and a permanent discount lowers your margin and pushes it up too. Add annual costs divided across the months so the number is not too optimistic.
A shop example
A café in Amman has fixed costs of JOD 2,400 a month: rent 900, salaries 1,200, utilities 300. A coffee sells for JOD 2 and costs JOD 0.800 to make, leaving JOD 1.200 per cup. Break-even = 2,400 ÷ 1.2 = 2,000 cups a month, or about 67 cups a day over 30 days.
Common questions
What is the difference between fixed and variable costs?
Fixed costs do not change with sales, like rent and salaries. Variable costs rise with every unit you sell, like coffee, milk and cups in a café, or the cost of goods in a grocery.
How can I lower my break-even point?
Cut fixed costs, or raise the profit per unit through a higher price or a lower supplier cost. Raising your average basket also helps you reach it sooner.