Lesson 3 – Break Even Analysis

A break even analysis tells you how much revenue you need in order to cover expenses of running a nonprofit. Break even analysis factors in fixed costs. This includes administrative expenses such as salaries and benefits and other overhead costs necessary to fulfill its mission. A basic break even formula is fixed costs divided by revenue. The result is the amount of revenue needed to break even. Another method divides fixed costs by revenue percentage that need to be raised to achieve break even.