Break-Even Calculator
Every business has a magic number: the sales volume where revenue exactly covers all costs, and profit begins. This break-even calculator finds it from your fixed costs, unit price and variable cost per unit — and shows the contribution margin that drives the whole model.
Use it before launching a product, opening a location, or taking on a new fixed cost like rent or a salary.
Enter valid values to see the results.
Formula
The denominator (price minus variable cost) is the contribution margin — what each sale contributes toward covering fixed costs. If it is zero or negative, no sales volume can ever break even: the pricing itself must change first.
What you need
- Fixed costs: expenses that stay constant regardless of sales — rent, salaries, insurance, software. Use a monthly figure.
- Price per unit: your actual average selling price after typical discounts.
- Variable cost per unit: costs incurred only when a unit sells — materials, packaging, shipping, payment fees, commissions.
Worked example
Practical tips
- Break-even is a monthly habit, not a one-time calculation — rerun it whenever costs or prices change.
- Lowering fixed costs lowers break-even faster than raising prices: cutting $1,000 of rent beats a small price rise.
- Add a safety margin: plan to sell 20–30% above break-even before calling a venture viable.
- For multiple products, use the average contribution margin weighted by your sales mix.
Break-even units at $8,000 fixed costs
| Price | Variable cost | Break-even units |
|---|---|---|
| $30 | $22 | 1,000 |
| $50 | $22 | 286 |
| $50 | $35 | 534 |
| $80 | $22 | 138 |
Common mistakes
- 1 Classifying costs wrongly: delivery that scales with orders is variable, not fixed.
- 2 Using list price instead of the real average price after discounts and refunds.
- 3 Treating break-even as the goal — it is the survival line; profit starts above it.
Frequently asked questions
What is a break-even point in simple terms?
The number of units you must sell for total revenue to equal total costs. Below it you lose money; above it every unit earns its contribution margin as profit.
What if my variable cost exceeds my price?
Then the contribution margin is negative and break-even is impossible — each sale loses money. Raise the price or cut variable costs before anything else.
How do I lower my break-even point?
Three levers: cut fixed costs, raise the price, or cut variable costs. A 10% improvement in contribution margin lowers break-even by about 10%.
Is break-even analysis useful for services?
Yes — treat a billable hour or project as the “unit”, with its direct labour cost as the variable cost.