How to Calculate Your Breakeven Point (for Canadian Small Businesses)

Written By Melissa Silber

Do you ever feel like you’re working nonstop but have no idea if your business is actually making money?
Or maybe you think you’re doing well because sales are steady… yet your bank account tells a very different story?

If that sounds familiar, you’re not alone. One of the most common things I hear from small business owners is:

“I know I’m busy… but I have no idea if I’m covering my costs.”

This is precisely where your breakeven point comes in.

Your breakeven point is the level of sales - either in units, hours, or revenue - where your total revenue equals your total costs.
At that point, you’ve covered everything you need to operate your business. Every dollar earned above that point becomes profit.

It’s one of the most straightforward yet most powerful tools for building sustainable pricing, making confident financial decisions, and understanding what your business actually needs to survive and grow.

And the best part? You don’t need to be a math person. I’ll walk you through everything step by step, in plain language (because the accounting world makes it way more complicated than it has to be).

What Is a Breakeven Point? (And Why It Matters)

Your breakeven point represents the exact moment your business stops losing money and starts making money.

Mathematically, it’s the point where: Total Revenue = Total Costs

Those costs include:

Fixed costs: Costs that stay the same regardless of how much you sell.
Examples: Rent, Insurance, Software subscriptions, Admin salaries, Utilities

Variable costs: Costs that vary with how much you produce or deliver.
Examples: Materials, Cost of goods sold (COGS), Packaging, Subcontractor costs, Shipping

Once your revenue covers both types of costs… Congratulations, you’ve broken even.

Anything above that point is profit.
Anything below it means you’re operating at a loss (even if you feel “busy”).

Breakeven helps with:

  • Pricing your products or services sustainably

  • Deciding when to hire

  • Evaluating whether to take on a new project

  • Understanding how many units or hours you need each month

  • Planning for taxes and HST obligations

  • Applying for loans or preparing business plans

Simply put: If you want a financially stable business - not just a busy one - you need to know your breakeven point.

Step-by-Step: How to Calculate Your Breakeven Point

Let’s walk through a simple way to calculate your breakeven point using real numbers.
I’ll start with a product-based example, then show you how service-based businesses can do the same thing.

Step 1: Identify Your Fixed Costs

Fixed costs are the expenses you pay no matter what-whether you sell zero units or 1,000.

For this example, let’s assume your business has:

  • Rent: $2,000

  • Insurance: $300

  • Software: $400

  • Admin contractor: $2,000

  • Misc expenses: $300

Total Fixed Costs = $5,000/month

This $5,000 is the amount your business must cover every month to keep the lights on.

Step 2: Determine Your Contribution Margin

Your contribution margin is the amount each unit contributes toward covering fixed costs.

The formula is: Contribution Margin = Selling Price – Variable Cost

Example:

  • Selling price: $100

  • Variable Cost (Materials, shipping, etc.): $60

Contribution margin = $100 – $60 = $40 per unit

This $40 is what you have available to apply toward that $5,000 in fixed costs.

Step 3: Apply the Breakeven Formula

The formula for breakeven in units is: Breakeven Units = Fixed Costs ÷ Contribution Margin

So using our numbers:

  • Fixed costs: $5,000

  • Contribution margin: $40

Breakeven = $5,000 ÷ $40 = 125 units

Your business must sell 125 units per month to break even.

Anything above 125 units becomes profit.
Anything below 125 units is a loss.

This kind of clarity is liberating. Instead of guessing or hoping, you now know exactly what your business needs to survive.

Breakeven for Service-Based Businesses

Service-based businesses don’t sell “units” - but you do sell either time or projects. So think of your billable hours (or projects) as your “unit.”

Example: Hourly Service Business

Let’s say you’re a consultant earning $75/hour, and your fixed costs are the same: $5,000/month.

Your contribution margin per “unit” (hour) is:

  • Selling price: $75

  • Variable cost: $0–$10 (depending on your type of work; many service businesses have very low variable costs)

Let’s assume minimal variable cost, so your contribution margin is $75/hour.

Your breakeven becomes:

$5,000 ÷ $75 = 67 billable hours per month

So you need 67 billable hours each month to break even.

This does not include time spent on admin, marketing, planning, or onboarding -  so if you’re working full-time, you can see how only 60–70% of hours being billable still creates financial stability.

This is the moment a lot of business owners realize:

  • “I’m charging too little.”

  • “I don’t have enough billable hours.”

  • “I’m overestimating how many billable hours are realistic.”

Breakeven brings that into focus quickly-without shame, just clarity.

CRA Tie-In: Why Breakeven Matters for Taxes

Understanding your breakeven point is critical for planning around:

  • Income tax

  • HST remittances

  • Payroll deductions

  • Corporate tax instalments

The CRA’s Checklist for Small Businesses emphasizes the importance of planning for taxes and understanding your obligation cycle.

A pricing strategy that doesn’t consider your tax obligations is a recipe for stress at year-end (or worse, at HST filing time).

Breakeven doesn’t just cover your operating costs-it should also inform:

  • Your pricing structure

  • Your hourly or project rates

  • Whether you can afford team members

  • When it’s safe to scale

Why Knowing Your Breakeven Point Matters

Knowing your breakeven point gives you control, confidence, and context.
Here’s why it’s so essential:

1. Sustainable Pricing

You can’t price your product or service responsibly without knowing your breakeven point. Too many business owners set prices based on what “feels fair” rather than what ensures survival.

2. Stronger Financial Decisions

Breakeven analysis helps you determine whether to:

  • Raise rates

  • Reduce expenses

  • Change suppliers

  • Add staff

  • Take on a big project

  • Launch a new product

3. Improved Loan Applications and Business Plans

Lenders love breakeven calculations.
It shows you understand your numbers and can operate sustainably.

4. Avoiding Burnout

If you constantly feel like you’re working but never getting ahead, breakeven brings clarity. It shows whether your business model is actually viable-or if it needs adjusting.

5. Helps Reduce Money Anxiety

Much of financial stress comes from the unknown. Breakeven replaces guesswork with clarity.

Digital Tools to Help You Calculate Your Breakeven Point

One of my goals as a CPA is to make financial tools accessible-especially to business owners who feel intimidated by spreadsheets or accounting jargon.

These tools help you build confidence, reduce mistakes, and finally understand what your business needs to thrive.

Key Takeaways

  • Your breakeven point is the level of sales where revenue covers all costs.

  • Knowing your breakeven helps you make informed pricing and business decisions.

  • Product businesses use “units sold”; service businesses use “hours” or “projects.”

  • Breakeven is essential for planning around CRA obligations like tax and HST.

  • Clarity leads to sustainability - not hustle culture or guessing.

Final Thoughts

Breakeven analysis isn’t just a financial exercise - it’s a reality check.
It tells you whether your business model makes sense, whether your pricing is aligned with your goals, and whether you’re unintentionally operating at a loss.

This isn’t about shame or self-blame. It’s about giving you the information and support you need to build a business that supports your life-not one that drains it.

Whether you’re just starting or growing quickly, knowing your breakeven point is one of the most empowering financial tools you can have.

If you’re ready to understand your breakeven point - or if you need help making sure your pricing actually supports your business - reach out HERE and let’s work through it together, without judgment and at your pace.
If you found this helpful, you may also like my blog:
Cash Flow vs. Profit in Canada: What’s the Difference? (And Why Both Matter) - a clear, approachable breakdown of why your bank account doesn’t always match your Income Statement.

Melissa Silber
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Cash Flow vs. Profit in Canada: What’s the Difference? (And Why Both Matter)