Business · 19 Oct 2026
Break-even point: how many sales do you need to cover your costs?
One simple number tells you whether your business plan works. Here is how to find it.
Key takeaways
- In a US Bureau of Labor Statistics study, 66% of new establishments survived two years, 44% survived four and 31% survived seven.
- In CB Insights' widely cited analysis of startup post-mortems, running out of cash was the most common reason given, at 38%.
- Knowing your break-even point and cash runway, and invoicing promptly, are simple defences.
Most new businesses start with a good idea and a lot of energy. Many still close within a few years. The data on why is surprisingly consistent: money runs out before the business finds its feet.
What the survival data shows
The US Bureau of Labor Statistics followed new establishments that opened in 1998. Two years later, 66% were still in business. After four years, 44% were. A follow-up study found 31% were still operating after seven years (BLS research paper). The steepest losses came in the first two years, and exits slowed considerably after year four. The BLS publishes updated survival data through its Business Employment Dynamics program.
Cash is usually the final straw
In CB Insights' widely cited review of 111 startup post-mortems, running out of cash or failing to raise new funding was the most common reason given, at 38%, ahead of no market need at 35% (SmartCompany). A newer CB Insights review of 431 venture-backed shutdowns since 2023 found running out of cash was the final outcome in 70% of cases (Crowdfund Insider).
CB Insights co-founder Anand Sanwal has argued that running out of cash is usually a symptom of deeper problems, such as weak demand or high costs. Either way, cash decides how long you have to fix them.
Three numbers every owner should know
- Break-even point. How many sales a month cover your fixed costs. Find it with the break-even calculator.
- Cash runway. How many months your cash lasts at your current burn rate. Work it out below.
- Margin. How much of each sale is profit. Set prices with the markup price calculator.
Get paid faster
A lot of cash pressure comes from money customers already owe you. Invoice as soon as work is done, state clear payment terms and follow up on the due date. A professional invoice from the invoice generator takes a minute. In the UK, businesses can also claim statutory interest on late commercial payments at 8% above the Bank of England base rate.
Key terms
- Cash flow
- The money moving in and out of a business over a period.
- Burn rate
- How much more cash goes out than comes in each month.
- Runway
- How many months a business can operate before its cash runs out.
- Break-even point
- The sales level where revenue exactly covers costs.
Sources
- US Bureau of Labor Statistics: Survival of new establishments (Monthly Labor Review, 2005)
- US Bureau of Labor Statistics: Establishment survival research paper (2006)
- US Bureau of Labor Statistics: Entrepreneurship and the US economy
- SmartCompany: Why startups fail (CB Insights post-mortems)
- Crowdfund Insider: Startups increasingly failing due to cash flow challenges
- GOV.UK: Late commercial payments, charging interest and debt recovery