Tool · calculator
Shop break-even calculator
How many billed hours a month before the shop is making money, split across your working days and the technicians turning them.
What you walk away with
- Outcome
- Break-even in billed hours for the month, in labor sales, and per technician per working day.
- Time
- About 8 minutes
Break-even in billed hours is fixed costs divided by the contribution each billed hour makes. Contribution is your effective labor rate minus what the hour costs to produce. The calculator turns that into hours for the month, then splits it across your working days and your technicians so it becomes a number a service manager can dispatch against.
Key takeaways
- Break-even hours equals fixed costs over effective rate minus variable cost per hour.
- Use the effective rate. The door rate flatters this answer badly.
- Parts gross profit covers fixed costs before labor has to, so it lowers the hours target.
- A contribution at or below zero has no break-even, and volume makes it worse.
Shop break-even calculator
Fixed costs on one side, what a billed hour contributes on the other. Defaults are one month.
Rent, insurance, salaries, software, utilities, loan payments.
Use the effective rate. The door rate will flatter this answer.
Technician wage plus payroll burden, per hour billed.
Set this to zero to see what labor has to carry on its own.
Working days in the month.
Bodies flagging time, not total headcount.
The arithmetic
- Contribution per hour
- $161.00 − $46.00 = $115.00
- Break-even hours
- $48,000.00 ÷ $115.00 = 417.4 hrs
- With parts gross profit
- ($48,000.00 − $21,000.00) ÷ $115.00 = 234.8 hrs
- Hours a day
- 234.8 hrs ÷ 22 days ÷ 4 techs = 2.7 hrs
This answer assumes your fixed costs hold at the volume you are solving for, that the variable cost per billed hour is flat across the month, and that parts gross profit arrives alongside those labor hours rather than independently of them. Add a technician or start paying overtime and the arithmetic needs running again with the new numbers.
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What is break-even, in a shop's units?
The Small Business Administration puts it plainly: "The break-even point is the point at which total cost and total revenue are equal, meaning there is no loss or gain for your small business." Their formula divides fixed costs by price minus variable costs to get a break-even point in units.
A repair shop's unit is a billed hour. That is what gets scheduled and sold, so an answer expressed in hours can be checked against the board on Monday morning. An answer in dollars of revenue cannot be dispatched against by anybody.
Which rate belongs in the formula?
The effective one. Your posted rate has not met a discount or a comeback yet, and break-even wants the number that has. Run this with a $185 door rate when your effective labor rate is $161 and you will set an hours target the shop can hit while still short of the rent.
The gap compounds, because the rate sits inside the denominator. Run the same $48,000 at a $185 rate and contribution is $139 an hour, which puts break-even at 345 hours. The real rate of $161 leaves $115 of contribution and 417 hours. Twenty-four dollars of rate moved the target by seventy-two billed hours.
What counts as a fixed cost?
Anything that arrives whether or not a car comes in. The SBA definition is "costs incurred during a specific period of time that do not change with the increase or decrease in production or services", which in a shop means rent, insurance, the service advisor's salary, software, utilities and loan payments.
Variable cost per billed hour is the other half. Technician wage plus payroll burden is most of it, and the burden is bigger than shops budget for. The employer's own share of Social Security is "6.2% for the employer" on top of the wage, with Medicare adding 1.45% on the same basis, before workers' compensation or a dime of benefits. If a cost only exists because the hour got produced, it is variable; if it shows up on a month with no cars, it is fixed.
| Cost | Where it goes | Why |
|---|---|---|
| Rent, insurance, software | Fixed | Arrives on an empty month |
| Advisor salary | Fixed | Paid whether or not hours are flagged |
| Technician wage and burden | Variable, per billed hour | Exists because the hour existed |
| Parts cost | Neither | Recovered in the parts sale, and its profit is entered separately |
A month, worked all the way through
The calculator loads with $48,000 of fixed costs, a $161 effective rate and $46 of variable cost per billed hour. Contribution is $115 an hour. Dividing $48,000 by $115 gives 417.39 billed hours, which is $67,200 of labor sales.
Now add the month's parts gross profit of $21,000. Fixed costs left for labor to carry drop to $27,000, and the hours target drops to 234.78. Across 22 working days that is 10.67 hours a day. Across four technicians it is 2.67 hours each per day.
Read those two figures together, because they describe the same month. 2.67 hours a technician per day is a light morning for one person. 10.67 hours is what the whole shop has to flag on a day when a truck is waiting on parts and somebody called in sick.
How does parts gross profit change the answer?
It pays down the fixed costs before labor has to. Set the parts figure to zero in the calculator and you see what labor alone would need to carry, which is the honest stress test for a shop whose parts margin is thin or whose parts mix is unpredictable.
Run it both ways every time. The labor-only number is the one to plan capacity against, because parts profit follows the work rather than leading it.
What is this answer assuming?
Four things, and each one is a place the arithmetic can drift from your month.
Fixed costs are assumed flat at the volume being solved for. Add a technician or start paying overtime and they are not. Variable cost per billed hour is assumed constant, which stops being true the moment overtime starts, because federal rules price those hours at "not less than one and one-half times the regular rate". Parts gross profit is assumed to arrive alongside those labor hours, and a large parts-only ticket breaks that link. And every hour is assumed to sell at the same effective rate, when in practice a fleet account and a retail customer contribute differently.
Treat the answer as a floor and re-run it whenever something structural changes. Related reading: gross profit, car count, the technician efficiency calculator for whether the hours are reachable, and the rest of the tools hub.
Where should you read next?
Break-even answers how many billed hours you need. The ARO calculator answers what each ticket has to carry to get there at your car count, which is the number an advisor can act on.
Questions shops ask
- What is the break-even formula for a repair shop?
- Fixed costs divided by the contribution each billed hour makes, where contribution is your effective labor rate minus the variable cost of producing that hour. The answer comes back in billed hours, which is the unit a shop schedules in. The Small Business Administration writes the same formula as fixed costs divided by price minus variable costs.
- Should I use my door rate or my effective labor rate?
- The effective rate. Break-even asks what an hour brings in once discounting and unpaid time have taken their cut, and the posted rate has met none of that yet. Using the door rate produces an hours target the shop can hit while still losing money.
- What goes into the variable cost per billed hour?
- Technician wage plus payroll burden for the hour, and anything else that only exists because the hour was produced. Rent does not belong there, because rent arrives whether the bay is full or empty.
- Where does parts gross profit fit in?
- It covers fixed costs before labor has to. Subtract the month's parts gross profit from fixed costs and divide what is left by the contribution per hour, which is why the calculator shows both the labor-only answer and the answer after parts. A shop with strong parts margin needs fewer billed hours to reach zero.
- What if my contribution per hour is zero or negative?
- Then there is no break-even at all and the calculator says so instead of printing a number. Every hour sold at or below its own cost widens the hole, so more volume makes it worse. The fix is the rate or the cost of producing the hour.
- Does this include the owner's pay?
- Only if the owner takes a salary that appears in fixed costs. Break-even means zero profit, so a shop that hits this number exactly has paid every bill and kept nothing. Put the pay you intend to take into fixed costs and the answer becomes the hours target you meant to ask for.