What is the break-even point
The break-even point meaning is simple: it’s the point where your revenue exactly covers your costs. There’s no profit and no loss.
Below that point, you’re losing money. Above it, every additional dollar goes to profit.
Now, in a traditional business, the break-even point formula usually consists of fixed costs, variable costs, and price per unit. Such a formula answers the most basic question: how many units do I need to sell to cover all my costs and not lose money?
But service businesses (just like yours) don’t operate based on units; they sell hours, expertise, and deliverables. So, the project break-even point works differently: instead of units sold, it’s driven by who’s working on the project, how many hours they spend, and what those hours cost your business. And that’s exactly why we built this calculator.
How to use the break-even calculator
Finding your break-even price is fairly easy and doesn’t require a full-blown spreadsheet. Here’s how the calculator shows you everything you need in a few steps.
Start with your team members
This step is the foundation of your break-even price, so be careful with it. For each person who’ll spend time on the project, you need to enter 3 things: their monthly cost, their monthly employment hours, and their delivery hours for this project.
Here’s the breakdown of each:
• Monthly cost for this person. This number is the total monthly cost of that person to your company, not just their salary. Add up salary, employment taxes, benefits, equipment, software licenses tied to their role, and any other recurring cost of having them on your team. If you’re a freelancer working solo, treat this field as a target monthly income (before income tax).
• Monthly employment hours. This is the total number of hours your company pays for this person each month, a.k.a, their full contractual capacity. Don’t subtract vacation days, holidays, sick leave, training, or internal meetings here, as those are still hours you’re paying for; they just don’t happen to be spent on this particular project. Keeping this number as your contractual capacity is what makes the hourly cost calculation accurate later on.
📌 Example: If someone is contracted for 160 hours a month, enter 160, even though they won’t spend every one of those hours delivering client work.
• Delivery hours for this project. This is the actual time this person will spend working on this specific project, not the hours you plan to bill the client. So, include internal work, meetings and calls, planning and research, unbilled revisions, and any time spent that won’t necessarily show up on the invoice. This is also the field where accuracy matters most: if these hours are based on your feelings and vibes, your break-even price can be considered a starting estimate. Hours tracked automatically over similar past projects will give you a far more reliable number, since delivery hours are usually where projects go over plan.
📌 Example: If a designer will spend 20 hours designing and another 5 hours on internal reviews and revisions that the client never sees, the delivery hours are 25, not 20.
Oh, and don’t forget to select your preferred currency. Just pick whichever you use for invoicing—USD, EUR, or GBP. The currency you choose applies to all values in the calculator.
Add additional project costs
Your team’s time usually makes up most of a project’s cost, but not all of the cost. This step lets you add whatever else it takes to actually deliver the project, so your break-even price reflects the real cost of doing the work.
Here’s what counts as an additional project cost:
1. Contractors or freelancers brought in to help with delivery, like a subcontracted developer, a freelance copywriter, or an outside specialist for a niche task.
2. Travel expenses tied to the project, like flights, hotels, or mileage for client meetings.
3. Software or tools purchased or licensed specifically for this project.
4. Materials or supplies needed to complete the work, like stock assets, print materials, or physical goods.
If your work is purely time-based, meaning you bill for hours and don't have contractors, travel, or extra tools to account for, leave this section empty. The calculator will still give you an accurate break-even price based on your team’s delivery cost alone, so don't feel like you need to invent numbers here just to fill in a field.
Choose your desired profit margin
Break-even covers your costs, nothing more. So, this step is about deciding
how much profit you want to build in on top of that.
Some of the options in the dropdown are:
• Break-even (0%). This is your absolute floor, i,e., the price with no profit margin at all. It’s useful to see on its own, but it’s definitely NOT a number you should be quoting to clients. Think of it more as the line you never want to price below.
• Preset margins (10%, 20%, or 30%). Each preset takes your total project cost and adds the selected percentage on top, so you can compare a conservative price against a more ambitious one side by side. 30% is the benchmark we recommend service businesses aim for if they want a healthy, sustainable margin (it’s also where the name of our
30% Method course comes from 🙂).
• Custom percentage. If none of the presets fit, you can enter your own target margin. This is useful if you already have a house standard for pricing, if the project carries more risk than usual and you want extra padding, or if you’re testing how a specific margin would affect your price before agreeing to a client’s budget. Ultimately, it’s up to you to decide.
Overall, our advice is don’t think of margin as just adding extra to your price. It’s really the difference between a business that lives from project to project, and one that has room to grow.
Calculate your break-even price
Once your team, costs, and desired margin are in, just hit the Calculate break-even button. In seconds, you’ll see a target project price, full cost breakdown, and pricing recommendations, so you know exactly what to charge and why.
Read your results
The calculator gives you 2 sections of results: your target project price with a full cost breakdown, and a set of pricing recommendations you can choose from.
Target project price
This is the number the whole calculator is built to get you to: the price that covers all your project costs plus the profit margin you selected. If you chose 20%, this is your total project cost with 20% built in on top, not just your break-even point.
Now, it’s worth being clear about what this price doesn’t include. It excludes VAT or sales tax, which gets added on top of whatever you charge, and it doesn’t account for income or corporate tax you’ll owe on the profit you make. This is the price for the project itself, before tax.
📌 Example: If your total project cost comes to $3,000 and you selected a 20% margin, your target project price is $3,600. That's what you’d quote the client, before any tax is added.
Costs
You also get a cost breakdown, showing delivery costs, additional costs, and total costs for this project:
• Delivery costs. This is the total cost of your team’s time on the project, every person’s hourly cost multiplied by their delivery hours, added together. It’s usually the biggest piece of your total project cost, since for most service businesses, time is the main thing you’re selling.
📌 Example: A senior consultant at $80 per hour for 20 hours ($1,600) plus a junior consultant at $40 per hour for 30 hours ($1,200) gives you a delivery cost of $2,800.
• Additional costs. This number is whatever you entered in the additional project costs step, like contractors, travel, project-specific software, or materials. If you skipped that section because it didn’t apply, this will simply show as $0 and won’t affect your total.
📌 Example: In the example above, if you added $200 for a contractor and some project-only software, additional costs would show as $200.
• Total project costs. This is delivery costs and additional costs combined, i.e., the full cost of delivering this project before any profit is added. It’s also your break-even point, the absolute minimum you can charge without losing money.
📌 Example: In our previous example, $2,800 in delivery costs plus $200 in additional costs gives you a total project cost of $3,000. And that’s your floor.
Pricing recommendations
Once your total project cost is set, the calculator shows you what to charge at 4 different margins, so you can pick the price that fits the project:
• Break-even. This is your total project cost with no margin added; the same $3,000 from the example above. It’s shown here as a reference point, the number you never want to quote a client, but useful to see next to the prices that do include a margin.
• 10% profit. Your total project cost with a 10% margin added on top. In our example, that’s $3,000 x 1.10 = $3,300. This is a conservative margin, one you might use for a project with very predictable scope, or a first project with a new client where you’re keeping the price competitive.
• 20% profit. Your total project cost with a 20% margin added on top, meaning $3,000 x 1.20 = $3,600 in our example. This number is not as safe as 10% but also not as ambitious as 30%; it’s a reasonable default for projects with a normal level of risk.
• 30% profit. Your total project cost with a 30% margin added on top, meaning $3,000 × 1.30 = $3,900. This is the margin we recommend service businesses aim for as a general benchmark. It’s the number that leaves room to cover the parts of your business a single project’s costs don’t, like slow months, unpaid pitches, and a buffer for when delivery runs long.
💡 What if the project takes longer?
The calculator shows you one more section. It shows you what happens to your break-even price if delivery hours run over your original estimate, using a simple adjuster (for example, +20% hours), so you can see the impact before it happens on a real project, not after.
Think of it this way: your break-even price is as accurate as your hour estimates. If those hours run long, and on most projects, they do, your actual cost to deliver goes up, but the price you quoted the client doesn't. The space between what you estimated and what you actually spend comes straight out of your margin.
Using the earlier example:
- Your total project cost was $3,000, based on 20 hours from a senior consultant and 30 hours from a junior consultant.
- If the project runs 20% over on hours, that's 24 and 36 hours instead, and your delivery cost jumps from $2,800 to $3,360. Add the same $200 in additional costs, and your real total project cost is now $3,560, not $3,000. If you quoted the client $3,300 (a 10% margin on your original estimate), you didn't make a 10% profit. You actually lost money on that project.
💡 How did you get those delivery hours?
At the very bottom of this calculator, you'll be asked how you arrived at your delivery hour estimates:
- Tracked automatically
- Estimated from memory.
It's a quick question (you simply need to choose one option or the other), but it says a lot about how much you can trust the number the calculator gives you.
Estimating from memory means you (or your team) sat down and guessed, based on how long similar work has taken in the past, or just a feeling about the project. This is completely normal, but it tends to run optimistically. Estimates built this way are often lower than what a project actually takes.
Tracked automatically means your delivery hours are based on real, recorded time from similar past projects. This is the more reliable option, since it reflects what work actually takes, interruptions, revisions, and all, rather than what you hope it will take.
Just keep in mind this isn't a graded question; there's no wrong answer. It's simply a useful check on the number you just got.
- If your hours came from memory, treat your break-even price as a solid starting point; it's not guaranteed, so it's a wise thing to do would be to add a solid buffer. If they came from tracked data, you can trust the number with a lot more confidence, since it's grounded in what similar work has actually cost you before.
