How to measure business costs
Every business has both fixed and variable costs it must cover to stay solvent.
Fixed costs are sometimes called 'overheads' or 'indirect costs'. These don't change with the amount of sales you make or goods you produce. Examples are office rent, web hosting charges, and business insurance.
Variable costs are sometimes called 'direct' costs. These vary in direct proportion to the amount of sales you make or goods you produce. Examples are raw materials and sales commission. You may need to take an average over 6 months if your sales levels fluctuate.
Monthly fixed costs + average monthly variable costs = TOTAL MONTHLY COSTS
Work out how many sales you need to cover your costs
Calculate the average value of each sale. To do this add your total sales revenue for a month and divide it by the number of sales transactions. You may have to do this for a few months to get an idea of the average amount of money each sale generates.
Total monthly costs ÷ average sales revenue = the NUMBER OF SALES PER MONTH you need to reach break even point