What is Margin of safety?
How far sales can fall before a business reaches break-even.
A large margin of safety means the business can survive a bad season. A margin of zero means any drop in sales causes a loss.
Formula
Margin of safety = (Expected sales − Break-even sales) ÷ Expected sales × 100%
Example
A hotel expecting to sell 10 rooms that breaks even at 4 has a margin of safety of 60%.
Why it matters
Lenders and investors look at it to judge risk.
Free tool
Hotel Break-Even Calculator →
Lesson
Break-Even Analysis: How Many Rooms Does a Hotel Need? →
🏨 See it in a hotel game
Run a hotel in PlayLobbyboss and watch how margin of safety changes with every decision you make.
Play free — no download