Break-even point: how many sales until you stop making a loss?

Kemal Bey the car wash owner's question

The rules described in this lesson are those of Turkish law.

Kemal Bey runs a car wash at the entrance to the industrial estate. A car wash costs 500 lira excluding VAT. Some days there is a queue; on others only the odd car turns up. The question on Kemal Bey's mind is simple: "How many cars do I have to wash a month so I don't make a loss?"

This question has a name: the break-even point (başabaş noktası). The level of sales at which income covers all costs. Below it, a loss; above it, a profit.

The dolmuş driver's sum

A dolmuş (shared minibus) driver knows how many passengers have to get on before the day's diesel, the minibus instalment and the rank fee are covered. Every passenger after that number is earnings. The break-even point is the business's "which passenger".

For the calculation you need the two pieces from the previous lesson: fixed costs and the contribution margin (Fixed costs, variable costs and unit cost).

Kemal Bey's figures

Monthly fixed costs, rounded and excluding VAT:

The employee line is the rounded figure of 40,874.63 TL, the employer's cost without incentives of an employee on the minimum wage in 2026.

Variable cost per car: shampoo and wax 50, water and electricity used in the wash 30, card commission 20; 100 lira in total.

Contribution margin (katkı payı) = 500 − 100 = 400 lira. Each car contributes 400 lira towards fixed costs.

The break-even point

Break-even units = fixed costs ÷ contribution margin per car

120,000 ÷ 400 = 300 cars.

Kemal Bey is open 25 days a month. 300 ÷ 25 = 12 cars a day. A month that stays below 12 cars a day is a loss; a month that goes above it is a profit.

Let's check:

You can also find the same point in lira. The contribution margin is 80% of the price (400 ÷ 500). Break-even sales revenue = fixed costs ÷ contribution margin ratio = 120,000 ÷ 0.80 = 150,000 lira. For a business that sells more than one service and finds it hard to count units, this route is more practical.

Target profit

Break-even means "zero profit". Kemal Bey is a sole proprietorship; in return for his own labour he wants 60,000 lira a month of profit before tax. Income tax and his own Bağ-Kur premium (Bağ-Kur is the social security scheme for the self-employed) will also come out of this money; what he takes home will be less. Add the target profit to fixed costs:

(120,000 + 60,000) ÷ 400 = 450 cars, that is, 18 cars a day.

Today he washes 375 cars a month on average: above break-even but below the target. At these sales his profit is 375 × 400 − 120,000 = 30,000 lira.

Margin of safety: how big a drop can you take?

Margin of safety ratio = (current sales − break-even) ÷ current sales

(375 − 300) ÷ 375 = 20%. So if Kemal Bey's sales fall by 20%, profit drops to zero; if they fall further, losses begin. A rainy month, roadworks outside, a new car wash opening in the next street: a business with a low ratio feels every shock more.

"What if…?"

The break-even point is not a one-off calculation; it is a decision tool. When something changes, recalculate:

Note the last line. If Kemal Bey hires a second employee, break-even rises to 403 cars; with today's 375 cars he would slip into a loss. A second employee only makes sense if they will clearly increase the number of cars washed. We look at this decision separately in the lesson A new employee or a second branch?.

If there is more than one service

Kemal Bey also does interior cleaning: price 900 lira, variable cost 150 lira, contribution 750 lira. If one in five of the cars that come in also wants interior cleaning on top of the wash, those cars leave 400 + 750 = 1,150 lira of contribution. The average contribution per car is found like this: (4 × 400 + 1 × 1,150) ÷ 5 = 550 lira. Break-even falls to 120,000 ÷ 550 = about 219 cars. If the sales mix changes, the average contribution changes too; recalculate every quarter.

Remember

• This calculation is before tax. Income tax or corporate tax comes out of profit separately.
• Profit break-even is not cash break-even. The principal part of a loan instalment is not an expense, but it leaves the cash box; a machine's depreciation (amortisman), on the other hand, is an expense, but no money leaves the cash box this month. You see separately in your cash plan when the cash box will get tight (Profit but no cash, The 13-week cash plan).
• The figures are estimates. Take fixed and variable costs from the average of the last three months; if you see a large deviation, recalculate.