Break-Even Calculator
Calculate your break-even point in units and revenue, how much you need to sell to cover all costs.
Break-even analysis answers the most basic business question: how much do I need to sell to stop losing money? Everything above the break-even point generates profit; everything below it generates loss. Knowing your break-even point is prerequisite to any realistic revenue or pricing decision.
Break-even units = Fixed Costs ÷ Contribution Margin per Unit. Contribution margin = Selling price − Variable cost per unit. This is the profit each sale contributes toward covering fixed costs before generating net profit.
Fixed vs variable costs
Fixed costs don't change with production volume, rent, salaries, insurance, software subscriptions, loan payments. These exist whether you sell 0 or 10,000 units. Variable costs scale directly with production, materials, packaging, transaction fees, direct labor per unit, shipping. The distinction matters because fixed costs create the break-even burden while variable costs affect the margin on each additional sale.
Contribution margin
Contribution margin per unit is the selling price minus variable cost, the amount each sale "contributes" toward covering fixed costs and generating profit. At $35 selling price and $12.50 variable cost, contribution margin is $22.50 per unit. Break-even = $8,500 fixed costs ÷ $22.50 contribution margin = 378 units. Selling 379 units generates profit; selling 377 generates a loss.
Using break-even for pricing decisions
Raising prices improves the contribution margin, lowering the break-even point. Lowering prices does the reverse. If you're considering a price change, recalculate break-even to see how it affects the minimum viable sales volume. Sometimes a lower price that increases volume still moves break-even in a favorable direction, it depends on how elastic demand is for your product.
Margin of safety
The margin of safety is the gap between actual or projected sales and break-even sales: (Current Sales − Break-Even Sales) ÷ Current Sales × 100. A 30% margin of safety means sales could fall 30% before the business moves into loss. A thin margin of safety indicates financial fragility, any significant revenue decline produces losses.
Frequently asked questions
What if I have multiple products with different margins?
Use a weighted average contribution margin: sum (contribution margin × sales mix %) for all products. This gives a blended break-even for the overall business. Individual product break-even analysis is useful for evaluating whether to continue or discontinue a specific product line.
Should I include owner salary in fixed costs?
Yes, if you pay yourself a salary, it's a real cost. If you don't pay yourself (common in early-stage startups), the break-even calculation reflects cash costs but understates the true economic cost of your time. For business viability analysis, include a market-rate owner compensation in fixed costs even if you're not actually paying it yet.