Breakeven Planning Template for UK SMEs

What a breakeven analysis tells a director

Breakeven is the revenue point at which total income equals total costs — no profit, no loss. Knowing your breakeven gives you a minimum target for sales activity, a reference point when evaluating price changes, and a baseline for assessing whether a new investment or loan repayment is serviceable from trading income.

This template is deliberately simple. It does not require accounting software; a spreadsheet or even a printed table is sufficient.

Step 1 — List your fixed costs

Fixed costs do not change with output volume. List them in full for a twelve-month period: premises rent and rates, insurance, loan repayments, software subscriptions, director salaries drawn as PAYE, accountancy fees, and any other committed outgoings. Sum these to produce your annual fixed cost total.

• Rent and business rates
• Insurance (employers', public liability, professional indemnity)
• Committed loan or hire-purchase repayments
• Annual software licences
• Fixed-term staffing contracts

Step 2 — Calculate contribution margin per unit

Contribution margin is the selling price of one unit minus the variable costs directly attributable to producing or delivering it. Variable costs typically include materials, direct labour paid by output, delivery, and sales commissions. If you sell services by the hour, substitute hours for units throughout.

Contribution margin percentage = (Selling price minus variable costs) ÷ Selling price × 100. A higher percentage means fewer units are required to cover fixed costs.

Step 3 — Calculate breakeven volume and revenue

Breakeven units = Total fixed costs ÷ Contribution margin per unit. Breakeven revenue = Total fixed costs ÷ Contribution margin percentage. Both figures are illustrative projections; actual results will vary with product mix, payment terms and timing.

Once you have the breakeven point, compare it honestly to your current or forecast sales. If the gap is narrow, your business has limited resilience to volume falls; if the margin of safety is wide, you have more flexibility on pricing and discretionary spend.

Using breakeven analysis before borrowing

If you are considering a business loan, add the monthly repayment to your annual fixed cost total and recalculate breakeven. This shows whether your current trading volume covers the additional commitment. A lender considering your application will perform a similar exercise; having your own breakeven analysis ready demonstrates financial literacy and speeds up credit assessment. These are illustrative calculations, not a borrowing offer.