How much must your shop sell each day just to break even?

Why this number matters

A busy counter feels like a profitable shop. It may not be. Rent, salaries and bills are due every month whether you sell Rs 30,000 or Rs 60,000 on a given day. The break-even sale is the daily sale at which the profit on goods exactly covers those costs. Below it you are losing money, above it you are saving.

The formula

Least daily sale = (monthly costs + expired and damaged goods) ÷ profit % ÷ days open

The profit % is your average profit on goods, as a decimal. 18% is 0.18. Costs are rent, staff salaries, electricity, gas, internet and anything else you pay every month.

Why divide by the profit %? Because only a part of each rupee sold is profit. If you keep 18 paisa from every rupee, you need to sell about Rs 5.55 to earn one rupee of profit.

A worked example

A medical store in a town. Open 30 days a month.

1. Profit on goods: 1,200,000 × 0.18 = Rs 216,000.
2. Costs: 60,000 + 90,000 + 25,000 + 15,000 = Rs 190,000.
3. Real savings: 216,000 − 190,000 − 10,000 = Rs 16,000. That is 1.3% of the sale.
4. Break-even: (190,000 + 10,000) = 200,000. Then 200,000 ÷ 0.18 = 1,111,111 a month, and ÷ 30 = Rs 37,037 a day.
5. Actual sale: 1,200,000 ÷ 30 = Rs 40,000 a day, about 8% above break-even.

This shop looks busy and earns Rs 16,000 a month. A small slip hurts it quickly.

What 2% of margin really does

Same shop, same costs, same sale. Only the profit % changes.

Two points of margin move this shop from a loss of Rs 8,000 to a saving of Rs 40,000 a month. Better rates on your ten best sellers, or a scheme read correctly, are worth more than many extra customers. Our guide on medicine profit with bonus and discount shows how to find the true rate.

Where the money leaks

• Expired and damaged goods. In the example, Rs 10,000 is 4.6% of the profit on goods (10,000 ÷ 216,000). If this were zero, break-even falls to Rs 35,185 a day. Read medicine expiry management.
• Credit (udhaar). Money owed to you is not cash in the drawer. If customers owe Rs 240,000 and you sell Rs 40,000 a day, that is 6 days of sale stuck outside the shop. See customer credit management.
• Costs that creep. Check rent, salaries and bills against last year, not last month.

Do it with the free tool

Our free shop health checkup does these sums for you. Enter the month's sale, the profit %, the days open, your costs, expired goods and the credit owed. It shows your real savings, the least sale needed each day, how many days of sale are stuck in credit and a score out of 100. It runs on your phone and does not send your numbers anywhere.

The profit % is the weak point. If you are not sure of yours, use the profit and loss report from your software, or take last month's sale and purchases from your books and compare.

A monthly habit

1. On the 1st, write down last month's sale, costs and expired stock.
2. Work out the break-even and compare it with your daily sale.
3. If you are less than 5% above it, look first at margin, then at expiry, then at credit.
4. Do the same sums again next month. The trend matters more than one result.

This is a planning estimate, not accounting or tax advice. Your accountant should confirm figures used for tax.

How Alpha helps

Alpha has profit and loss, sales, purchase, tax and stock valuation reports with Excel and PDF export, customer ledgers with receivables and aging, and expiring-soon and expired lists. That gives you the profit %, the credit owed and the expired stock without counting by hand. See Alpha for pharmacies and pricing, from Rs 2,500 a month with a 7-day free trial.