Break-Even Calculator

Break-even analysis determines the exact point where your total revenue equals total costs. Below this point, you're losing money. Above it, every sale generates profit.

The core formula is straightforward: Break-Even Units = Fixed Costs ÷ (Selling Price − Variable Cost Per Unit). The denominator — selling price minus variable cost — is called the contribution margin. It represents how much each unit "contributes" toward covering your fixed costs.

For example, if your monthly fixed costs are $5,000, you sell each unit for $25, and each unit costs $10 to produce, your contribution margin is $15. You need to sell $5,000 ÷ $15 = 334 units per month to break even. Unit 335 is where profit begins.

To find break-even revenue, multiply break-even units by the selling price: 334 × $25 = $8,350 in monthly revenue needed. You can also calculate it directly: Fixed Costs ÷ Contribution Margin Percentage.

This calculator computes all of these figures instantly. Change any input and the break-even point updates in real time, with a chart showing where your revenue line crosses your total cost line.

Before launching a business: Validate whether your pricing and cost structure can realistically produce profit. If break-even requires selling more than your market can support, revisit your assumptions before investing.

When evaluating a price change: See how raising or lowering prices affects the number of units you need to sell. A 10% price increase can reduce your break-even volume significantly.

When reviewing costs: Test the impact of negotiating lower rent, finding cheaper suppliers, or cutting fixed expenses. Understand which cost levers have the biggest impact.

For investor or loan conversations: Lenders and investors want to see that you understand your financial floor. Break-even analysis is one of the first things they look for in a business plan.

Accurate break-even analysis depends on correctly categorizing your costs. Misclassify a variable cost as fixed (or vice versa) and your break-even point will be wrong.

Fixed Costs

Fixed costs remain the same regardless of how many units you sell. Common examples include rent or lease payments, insurance premiums, salaried employee wages, loan payments, software subscriptions, and business licenses. These costs create your financial "floor" — you pay them whether you sell zero units or ten thousand. Not sure what your fixed costs will be? Our startup cost estimator breaks down one-time and recurring costs by business type.

Variable Costs

Variable costs change with each unit produced or sold. They include raw materials, packaging, shipping, sales commissions, payment processing fees, and hourly labor directly tied to production. If you sell nothing, your variable costs are zero.

The Contribution Margin

The contribution margin is the most important number in break-even analysis. It tells you how much each sale contributes toward covering fixed costs and, eventually, generating profit. A higher contribution margin means fewer sales needed to break even.

You can express it as a dollar amount (selling price minus variable cost) or as a percentage (contribution margin divided by selling price). Both are useful: the dollar amount tells you per-unit contribution, and the percentage helps compare products with different price points.

Margin of Safety

Once you know your break-even point, calculate your margin of safety: actual (or expected) sales minus break-even sales. This tells you how much sales can decline before you start losing money. A healthy margin of safety — typically 20% or more — gives you a buffer against slow months, unexpected costs, or economic downturns. The SBA recommends including break-even analysis in every formal business plan.