What is break-even point and why is it important?

Break-even point is when total revenue equals total costs (fixed + variable), resulting in zero profit or loss. It shows the minimum sales needed to cover all business expenses. For Kenya businesses, knowing your break-even helps with pricing strategy, sales targets, and loan applications to banks and funds like Youth Fund or Women Enterprise Fund.

How do I calculate break-even point in Kenya Shillings?

Break-even Point (units) = Fixed Costs / (Selling Price - Variable Cost per Unit). Example: If your fixed costs are KES 100,000/month, selling price is KES 500, and variable cost is KES 300, then Contribution Margin = 500-300 = KES 200. Break-even = 100,000/200 = 500 units per month. In revenue: 500 x KES 500 = KES 250,000.

What are fixed costs vs variable costs for Kenya businesses?

Fixed Costs remain constant regardless of sales: rent (KES 20K-200K in Nairobi), salaries, insurance, business licenses, depreciation. Variable Costs change with production: raw materials, packaging, shipping, sales commissions. Example: Restaurant fixed costs = rent + salaries + utilities. Variable costs = ingredients per meal served.

What is a good contribution margin percentage?

Contribution margin varies by industry. Retail typically has 30-50%, restaurants 60-70%, services 70-90%. Higher margins mean faster break-even. In Kenya markets, aim for at least 30% contribution margin. If margins are too low, consider value addition, premium positioning, or reducing variable costs through bulk purchasing.

How can I reduce my break-even point?

Reduce break-even by: 1) Lower fixed costs - negotiate rent, use co-working spaces, outsource instead of hiring full-time, 2) Reduce variable costs - better supplier deals, bulk purchasing, reduce waste, 3) Increase prices - add value, improve branding, target premium customers. Every KES 10,000 reduction in fixed costs means fewer units needed to break even.

Break-even Top Calculator 2025

Calculate your break-even point - the sales needed to cover all costs. Essential for business planning, pricing strategy, and profitability analysis.

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Break-even Point Calculator

Total Fixed Costs per Month (KES)

Rent, salaries, utilities, insurance, licenses. Calculate staff PAYE contributions for accurate salary costs.

Selling Price per Unit (KES)

Price you charge customers per item/service

Variable Cost per Unit (KES)

Cost of materials, packaging, shipping per unit

Common Fixed Costs (KES/month)

Rent (Nairobi)20K-200K

SalariesVaries

Utilities5K-30K

Business License10K-100K/yr

Insurance5K-50K

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Disclaimer: This calculator provides break-even estimates for business planning. Actual results depend on market conditions, competition, and operational efficiency. Consult a business advisor or accountant for comprehensive financial planning.