Certified Public Accountant (CPA) and Financial Analyst specializing in professional service firm profitability.
Find the number of clients or billable hours your accounting practice needs to cover all costs. Enter any three variables—Monthly Fixed Costs, Avg. Revenue per Client, Avg. Cost per Client, or Breakeven Clients—to solve for the fourth.
Accountant Breakeven Calculator
Accounting Practice Breakeven Formula
The breakeven formula for an accounting practice finds the number of clients (or billable hours) (Q) you must service for your revenue to cover all monthly fixed and variable costs.
Q = F / (P – V)
Solve for Monthly Fixed Costs (F):
F = Q * (P – V)
Solve for Avg. Revenue per Client (P):
P = (F / Q) + V
Solve for Avg. Variable Cost per Client (V):
V = P – (F / Q)
Variables Explained
- Monthly Fixed Costs (F): Your total, recurring monthly overhead (e.g., office rent, support staff salaries, E&O insurance, tax software subscriptions, utilities).
- Avg. Revenue per Client (P): Your average *collected* revenue per client per month (e.g., average monthly retainer).
- Avg. Variable Cost per Client (V): The average cost directly tied to servicing one client (e.g., software seat licenses, processing fees, specific supplies).
- Breakeven Clients (Q): The total number of clients you need to service each month to reach $0 in profit.
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What is an Accountant’s Breakeven Point?
An **Accountant’s Breakeven Point** is the exact number of clients (Q) or billable hours your practice must service each month to cover all of its costs. It’s the minimum capacity you must operate at to stop losing money and start generating profit. This number is vital for setting retainers, deciding when to hire staff, and managing overhead.
**Fixed Costs (F)** are your consistent monthly overhead, regardless of client load. This includes your office rent, salaries for administrative staff, Errors & Omissions (E&O) insurance, accounting and tax software subscriptions, and utilities.
**Variable Costs (V)** are costs that occur *only* when you service a client. For an accounting firm, this is often low but can include things like per-client software fees (e.g., a QBO seat), bank processing fees, or outsourcing costs for simple data entry.
The **Contribution Margin** (P – V) is the profit from a single client that goes toward paying your fixed costs. If your average client retainer is $300 (P) and your variable costs are $20 (V), your contribution margin is $280. This calculator finds how many $280 “profit chunks” you need to cover your total fixed costs.
How to Calculate Accountant Breakeven (Example)
Let’s calculate the breakeven point for a solo CPA practice with one admin.
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Identify Monthly Fixed Costs (F):
Your office rent is $2,000, admin salary is $3,500, E&O insurance is $500, and software/utilities total $2,000. Your (F) is $8,000.
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Identify Avg. Revenue per Client (P):
You have a mix of clients, but your total monthly collected revenue is $15,000 from 50 clients. Your (P) is `$15,000 / 50 = $300`.
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Identify Avg. Variable Cost (V):
You find that per-client software fees and processing average to $20 per client.
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Apply the Formula: Q = F / (P – V)
First, calculate the contribution margin per client: $300 (P) – $20 (V) = $280.
Next, divide the fixed costs by this margin:
Q = $8,000 / $280 = 28.57 -
Conclusion:
You must service 29 clients (rounding up) each month at this average rate to cover all your practice’s costs. Every client after the 29th generates profit.
Frequently Asked Questions (FAQ)
You can use either, as long as you are consistent. If you use **Clients** for (Q), then (P) must be **Avg. Revenue per Client** and (V) must be **Avg. Cost per Client**. If you use **Hours** for (Q), then (P) must be **Avg. Collected Rate per Hour** and (V) must be **Avg. Cost per Hour**.
It depends. If you pay the accountant a flat salary, their pay is a **Fixed Cost (F)**. If you pay them a percentage of the revenue they manage, their pay could be considered a **Variable Cost (V)**.
For seasonal work like tax preparation, it’s better to calculate this annually. (F) = Total annual fixed costs. (P) = Avg. price per tax return. (V) = Avg. variable cost per return (e-filing fees, etc.). (Q) = Breakeven number of returns per year.
Add the new accountant’s monthly salary (e.g., $5,000) to your (F). If your (F) goes from $8,000 to $13,000, your new breakeven point becomes `$13,000 / $280 = 47` clients. You must determine if you can add 18 new clients (47 – 29) to cover the new hire.