break-even

---
name: break-even
description: Works out how many covers, pints or transactions you have to take before the business earns a pound, using your own fixed costs and your own till figures, and gives you the daily number to run against. Use when you want to know what a quiet Tuesday really costs, before you hire, or before you sign for a bigger site.
---

# Know the number of covers you need before the day starts paying you

You give this a month of bank statements, your rota, your last supplier invoices and your till totals. You get back one figure you can write on the office wall: the covers you must serve before the business earns a pound, and the daily version of it split across the days you actually open. Underneath it sits the whole calculation, every fixed cost named and sourced from a real payment, so that when the number is uncomfortable you can see exactly which line is making it uncomfortable rather than arguing with the total.

## What it does

1. **Fix one period, one site, and one trading pattern before touching a number.** Take a single calendar month that was typical, not your best and not Christmas. Write down the days you opened, the sessions you traded, and the covers or transactions you served in that month from the till, not from memory. Everything after this is built on that month, and if the month was atypical the answer is atypical. If the business trades in clearly different modes, for example a pub that does food Thursday to Sunday and wet sales only Monday to Wednesday, run the calculation twice rather than blending them, because a blended contribution per cover describes a business that does not exist.

2. **List every fixed cost that leaves the bank whether you open the doors or not, one line per payment.** Rent, business rates, insurance, licence fees, the alarm and fire contracts, the EPOS subscription, card terminal rental, music licensing, waste collection, accountancy, broadband and phone, loan and finance repayments, and the salaried wages of anyone who gets paid the same whether you are busy or empty. Each line carries the amount, the frequency, the supplier and the date of the bank payment it was read from. The Open University's cost accounting course defines these plainly: "Fixed costs are costs that remain constant, regardless of the level of activity or output." A cost you cannot point at on a statement does not go in the list; it goes in a separate "not evidenced yet" list, and the final figure says how many pounds are sitting in it.

3. **Put the real employment cost on the rota, not the hourly rate, because the rate is roughly a fifth short.** From 1 April 2026 the National Living Wage for workers "Aged 21 and above" is "£12.71" an hour, with "£10.85" for those "Aged 18 to 20 inclusive" and "£8" for under 18s and for apprentices aged under 19. On top of that the employer pays secondary Class 1 National Insurance at "15%" on earnings above a secondary threshold of "£96 per week / £417 per month / £5,000 per year", and there is the pension contribution and the holiday pay accrual. Employment Allowance can reduce the annual National Insurance bill "by up to £10,500" for eligible employers, so check whether the business claims it before loading the full NIC figure into the model. Build the cost for each rota line as hours multiplied by rate, plus employer NIC on the part above the threshold, plus pension, plus holiday accrual, and use that figure everywhere. Owners who model wages at the headline hourly rate produce a break-even number that is optimistic by thousands of pounds a month and then cannot work out why the bank balance disagrees with the spreadsheet.

4. **Split the wage bill into the part that is fixed and the part that moves with trade, and say where you drew the line.** A chef on a salary and a general manager are fixed: they are paid on a dead Tuesday. A weekend kitchen porter rostered only when you are busy is variable. Most hospitality rotas are mostly fixed in practice, because you cannot send half a kitchen home at seven o'clock, and pretending otherwise is the commonest way these models go wrong. Put every rota line in one column or the other, write one sentence saying why the borderline ones landed where they did, and total each column. If more than about a fifth of the wage bill is being treated as variable, say so explicitly, because that assumption is doing a lot of work in the final answer.

5. **Work out contribution per cover from your own till and your own invoices, and show both halves.** Take the month's net sales excluding VAT and divide by the covers served to get average spend per cover. Take the month's cost of goods, opening stock plus purchases minus closing stock, excluding VAT, and divide by the same covers to get variable cost per cover. Add the other genuinely variable costs per cover: card processing fees, delivery platform commission on the transactions that went through a platform, disposables, and the variable share of wages from step 4 converted to a per-cover figure. Contribution per cover is the first number minus the second. The Open University defines contribution as "The excess of revenue generated from the sales of a product/service over the variable costs", and describes it as sales minus variable cost. Show the pounds and pence of each half, not just the answer, because the whole value of this exercise is being able to see which half to attack.

6. **Divide, and then state the number three ways so it survives contact with a real week.** Break-even covers for the month equals total fixed costs divided by contribution per cover. Then produce: the monthly covers, the covers per trading day across the days you actually open, and the net sales figure the same calculation implies. Round up, never down, and never to a comfortable number. Put the date beside it. Then say plainly how far above or below the break-even figure last month's actual covers were, in covers and in pounds, because an owner who is told they need 41 covers a day and served 38 has been handed a decision, while one who is told they need "around 40" has been handed a feeling.

7. **Test the VAT cliff separately, because it is a step, not a slope.** You must register for VAT if "your total taxable turnover for the last 12 months goes over the VAT threshold" of "£90,000", and also if "you realise that your total taxable turnover is going to go over the £90,000 threshold in the next 30 days". For a business trading below that line, crossing it does not shave the margin; it removes roughly a sixth of every food and drink sale unless prices rise, and the break-even covers jump in one step. If the twelve-month rolling total is anywhere within about ten per cent of the threshold, run the whole calculation a second time on VAT-registered assumptions and show both answers side by side. Do not model a partial year or a rate the business is not on; if the business is on the Flat Rate Scheme, say the figure needs the accountant's rate before it means anything.

8. **Check the business rates line against the reliefs before accepting it as fixed.** Small business rate relief means "You will not pay business rates on a property with a rateable value of £12,000 or less", and "For properties with a rateable value of £12,001 to £15,000, the rate of relief will go down gradually from 100% to 0%", with GOV.UK's own examples that "If your rateable value is £13,500, you'll get 50% off your bill. If your rateable value is £14,000, you'll get 33% off." The most recent revaluation "came into effect in England and Wales on 1 April 2026", so a bill based on the previous list is out of date. If the rates line in step 2 looks wrong against the rateable value, flag it as a line to check rather than silently correcting it, because a wrong rates figure changes the break-even number and an unchecked correction changes it in the wrong direction.

9. **Finish with the four levers, each priced in covers.** Show what happens to the break-even figure if: average spend per cover rises by fifty pence; cost of goods falls by one percentage point of sales; one fixed cost line is removed entirely, naming the largest removable line; and one extra session is opened or closed. Express every answer as the change in covers per day, not as a percentage, because covers per day is the only unit a head chef and a general manager can act on. Name the assumption behind each lever. This is the part the owner actually uses, and it is worthless if the levers are generic: "put prices up" is not a lever, "adding fifty pence to average spend takes 4 covers a day off the target" is.

## Then it checks

1. Every fixed cost line names a supplier, an amount, a frequency and the bank payment date it was read from, and any cost that could not be evidenced appears in a separate list with its own total rather than in the main figure.
2. The wage figure includes employer National Insurance, pension and holiday accrual, and the pack states the hourly rates used and the age bands they came from, so the arithmetic can be redone by hand.
3. Fixed and variable wages are listed separately, the split is stated in pounds and as a share of the wage bill, and one sentence explains where the line was drawn.
4. Contribution per cover shows the average spend per cover and the variable cost per cover as separate figures, both excluding VAT, both from the same month and the same cover count.
5. The break-even answer appears as monthly covers, covers per trading day and net sales, with the trading days counted and listed, and it is compared with the actual covers served in the same month.
6. The VAT position is stated explicitly as registered or not registered, with the rolling twelve-month taxable turnover figure shown, and if that figure is within ten per cent of £90,000 a second break-even answer appears beside the first.

Any check fails: name it, redo that step once. Failed twice: say what is wrong and stop.

## Rules
- Public information only.
- Never invent a fact, a number or a quote.
- Anything sent in someone's name says whose name it is.
- Never fill a missing cost with a typical figure, an industry percentage or a rule of thumb. A break-even number is only useful because it is the owner's own; one borrowed percentage turns it into a guess wearing a suit, and it will be trusted anyway because it has a decimal point.
- Never model wages at the hourly rate alone. Employer National Insurance, pension and holiday accrual are real money leaving the account, and a model that omits them understates the target by enough to justify a hire the business cannot afford.
- Never present one break-even number as the answer for a business with genuinely different trading modes. Run it per mode and label each one, because a blended figure flatters the weak sessions and punishes the strong ones.
- Never round the answer down or soften it. The point of this figure is that it is uncomfortable on the days it should be.
- This output is a working document prepared for the owner's accountant to check before it is used for pricing, hiring or a funding application. It performs arithmetic on figures the owner supplied; it is not accounting, tax or financial advice, and the VAT and National Insurance positions in particular must be confirmed against the business's own circumstances.

## Built from
- The Open University, OpenLearn, "Fundamentals of cost accounting and environmental management accounting", section on variable and fixed costs, https://www.open.edu/openlearn/money-business/fundamentals-cost-accounting-and-environmental-management-accounting/content-section-3.1, no publication date shown on the page, read 14 September 2026: the definitions of fixed cost, variable cost and contribution that steps 2 and 5 are built on.
- GOV.UK, "National Minimum Wage and National Living Wage rates", https://www.gov.uk/national-minimum-wage-rates, read 14 September 2026: the hourly rates by age band used in step 3.
- HM Revenue & Customs, "Rates and thresholds for employers 2026 to 2027", https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2026-to-2027, read 14 September 2026: the 15% secondary Class 1 rate, the £96 per week secondary threshold and the £10,500 Employment Allowance that make step 3's true employment cost.
- GOV.UK, "Register for VAT: When to register", https://www.gov.uk/vat-registration/when-to-register, read 14 September 2026: the £90,000 threshold and the rolling twelve-month and thirty-day forward tests behind step 7.
- GOV.UK, "Apply for business rates relief: Small business rate relief", https://www.gov.uk/apply-for-business-rate-relief/small-business-rate-relief, and "Introduction to business rates: Revaluation", https://www.gov.uk/introduction-to-business-rates/revaluation, read 14 September 2026: the £12,000 and £15,000 thresholds, the tapering examples and the 1 April 2026 revaluation date used in step 8.

# break-even

## You are given
A folder for one UK hospitality business containing any of: bank statement exports (CSV or PDF), a rota or payroll summary, supplier invoices, and a till or EPOS sales export for one calendar month. The user will say which month, which days the business opens, and how many covers or transactions were served that month. Some costs will be missing. Never fill a gap with a typical figure.

## Produce
Write these files into an `output/` folder beside the inputs.

1. `fixed-costs.csv` - columns: `line_id, supplier, description, amount_gbp, frequency, monthly_equivalent_gbp, evidence_source, evidence_date, confidence`. `frequency` is one of `monthly, quarterly, annual, weekly, one_off`. `confidence` is `evidenced` when a bank line or invoice was seen, `stated` when the user gave the figure with no document, `missing` when neither.
2. `variable-costs.csv` - columns: `line_id, description, monthly_amount_gbp, per_cover_gbp, basis, evidence_source, confidence`. `basis` records how the per-cover figure was derived, for example `cost_of_goods = opening_stock + purchases - closing_stock`.
3. `wages.csv` - columns: `role, hours_month, hourly_rate_gbp, gross_pay_gbp, employer_nic_gbp, pension_gbp, holiday_accrual_gbp, total_cost_gbp, fixed_or_variable`. Employer secondary Class 1 National Insurance is 15% on monthly earnings above £417. Show the threshold used in a `notes` column.
4. `break-even.csv` - one row per scenario. Columns: `scenario, fixed_costs_month_gbp, contribution_per_cover_gbp, break_even_covers_month, trading_days, break_even_covers_per_day, break_even_net_sales_gbp, actual_covers_month, gap_covers`. Scenarios: `as_is`, `vat_registered`, plus one row per lever (`spend_plus_50p`, `cogs_minus_1pt`, `remove_largest_fixed_line`, `close_one_session`).
5. `break-even.md` - one page. The headline covers-per-day figure first, then the gap against actual, then the four levers each expressed as a change in covers per day, then a list of every cost marked `missing` with its own total.

## Rules
- British English. No em dash characters. Use " - " or a comma. No emoji.
- Round break-even covers UP to the next whole cover, never down.
- Never invent a cost, a rate or a percentage. A cost with no document is written with `confidence=stated` or `confidence=missing` and is listed separately in the markdown.
- All sales and cost figures exclude VAT. State on every file whether the business is VAT registered.
- If the rolling twelve-month taxable turnover is within 10% of £90,000, the `vat_registered` scenario row is mandatory.
- If any required input is absent, still write every file, leave the affected cells empty and name what was missing in `break-even.md`.

## Return
The absolute path of the `output/` folder, the headline break-even covers per trading day, the gap against actual covers, the count of cost lines by confidence value, and a numbered list of every input you could not find.