SMALL BUSINESS MATHS MADE SIMPLE
‘I have ₹2 lakh. What business can I start?’ The better question is: how many sales do I need every month before I stop losing money?
By ARS Market Research Services, Chennai. The method works in any country and any currency.
What is the break-even point?
The break-even point is the number of sales at which your income exactly covers your costs. Below it you lose money. Above it you earn profit. Every owner should know this number before opening, because it turns a vague hope into a target you can test.
The formula
Fixed cost
What you pay every month even if you sell nothing: rent, salaries, electricity, loan instalments.Direct cost
What each sale costs you to deliver: ingredients, packing, delivery, card fees.Profit per sale
Price minus direct cost. Economists call it the contribution margin.Worked example (illustrative numbers)
A small tailoring unit. These are example figures to show the method.
| Item | Illustration |
|---|---|
| Monthly fixed cost (rent, helper, power) | ₹20,000 |
| Price per garment | ₹600 |
| Direct cost per garment (cloth, thread, buttons) | ₹500 |
| Profit per garment | ₹100 |
| Break-even sales | 200 garments a month (₹20,000 ÷ ₹100) |
Now ask: can my town give me 200 garments every month, about 7 a day? If your honest answer is ‘maybe 120’, this idea loses money at this price. That one check filters out most weak ideas.
How to hit a profit target
To earn ₹30,000 a month on top of costs, add the target to the fixed cost: (₹20,000 + ₹30,000) ÷ ₹100 = 500 garments. Seeing 500 beside a town that can give you 200 tells you to change the plan, not the hope.
Three ways to lower your break-even point
1. Raise the price a little
A ₹50 price rise doubles profit per garment to ₹150 and cuts break-even from 200 to about 133 sales. Test the price with customers first.2. Cut direct cost
Buy cloth in bulk, reduce waste and compare three suppliers. Every rupee saved per sale lowers the target.3. Cut fixed cost
Start from home, share a workshop or hire part-time. Lower fixed cost means less pressure in the first six months.Common mistakes
- Leaving your own time and salary out of fixed costs.
- Using the best month’s sales instead of an average month.
- Forgetting loan instalments. Check scheme terms such as MUDRA before you plan the repayment.
- Not registering the business. See Udyam registration for Indian MSMEs.
Not sure how many sales your area can give?
ARS Market Research Services measures local demand with a customer survey, so your break-even target rests on field data instead of a guess.
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Every idea in our guide 50 Low-Investment Business Ideas in India Under ₹10 Lakh (2026) shows start-up cost, customers and an illustrative month of revenue and profit. See all four books at arsmrs.in/books and ready market reports in the ARS Marketplace.