Break-Even Point Calculator
Find out exactly how many units you need to sell before your business turns a profit.
Rent, salaries, software — costs that don't change with sales volume.
Cost per unit sold: materials, shipping, payment fees.
60.0% of each sale goes toward covering fixed costs
Break-Even Point
units to sell
Break-even = Fixed Costs ÷ (Price − Variable Cost)
The break-even point is the moment a business stops losing money — the sales volume at which revenue finally covers every cost, and the next unit sold produces actual profit rather than a smaller loss. It is the single most useful number a new business can know, and most founders never calculate it. They track revenue, which feels like progress, while the fixed costs quietly accumulate underneath. This calculator gives you the honest figure: how many units you must sell, or how much revenue you must generate, before the business is genuinely self-sustaining. The answer is often much higher than expected, and finding that out on a spreadsheet is considerably cheaper than finding it out over eighteen months.
How the calculator works
You enter three things: your fixed costs for the period, the price you charge per unit, and the variable cost of producing each unit. The calculator subtracts the variable cost from the price to find your contribution margin — the amount each sale contributes toward covering fixed costs — then divides fixed costs by that margin. The result is the number of units at which you break even. It also shows the revenue equivalent, which is more useful for service businesses that do not sell discrete units.
The formula
Contribution margin = Price − Variable cost per unit
Break-even units = Fixed costs ÷ Contribution margin
Break-even revenue = Fixed costs ÷ (Contribution margin ÷ Price)
Example: $6,000 fixed, $50 price, $20 variable
Margin = 50 − 20 = $30
Units = 6,000 ÷ 30 = 200 unitsThe contribution margin is the concept that matters, and it is why cutting price is so dangerous. In the example above, a 10% discount drops the price to $45 and the margin to $25 — but break-even jumps from 200 units to 240. A 10% price cut required a 20% increase in volume just to stay level. This asymmetry is why discounting to "drive volume" destroys more businesses than it saves, and why the arithmetic should be run before the promotion is announced rather than after.
What to know about break-even analysis
- 1Classify costs honestly. Fixed costs stay the same whether you sell one unit or a thousand — rent, salaries, software. Variable costs scale with each sale: materials, shipping, payment processing. Misfiling a variable cost as fixed makes your margin look better than it is, and the error compounds across every projection built on top of it.
- 2Pay yourself in the fixed costs. Founders routinely exclude their own salary and then celebrate reaching break-even at a business that cannot actually support them. If your living costs are $3,000 a month, that belongs in fixed costs. Otherwise you are calculating the break-even of a hobby.
- 3Raising price beats cutting cost, usually. In the example above, a 10% price increase to $55 lifts the margin to $35 and drops break-even to 172 units — a 14% improvement from one decision, with no operational change. Price is the highest-leverage variable on the sheet and typically the least examined.
- 4Break-even is not the goal, it is the floor. It tells you where survival begins, not where a business becomes worth running. Set your real target above it with enough headroom to absorb a bad quarter, and treat the break-even figure as a warning line rather than a finish line.
- 5Recalculate whenever costs move. A rent increase, a supplier price change, or a new subscription all shift the number. Businesses drift below break-even gradually and invisibly, because nobody re-ran the math after the third small cost was added.
Frequently asked questions
What counts as a fixed cost versus a variable cost?
Fixed costs do not change with sales volume: rent, insurance, salaried staff, software subscriptions. Variable costs occur per sale: raw materials, packaging, shipping, transaction fees, hourly labor tied to production. Some costs are genuinely mixed — a phone plan with a base fee plus usage — and the cleanest approach is to split them into their fixed and variable parts rather than forcing them into one bucket.
How do I calculate break-even for a service business?
Use billable hours as your unit. Your price is your hourly rate, your variable cost is whatever you spend to deliver an hour of work — often near zero for consulting, higher if you subcontract. Divide fixed costs by that margin to get the hours you must bill. This is usually a revealing exercise, because it exposes how few hours in a week are actually billable once admin and sales are accounted for.
Why does my break-even point keep rising?
Almost always because fixed costs crept up. Businesses add a subscription here, a contractor there, a slightly larger office, and each looks small in isolation. Since break-even is fixed costs divided by margin, every addition raises the bar permanently. This is why growing revenue can coincide with worsening finances — the costs grew faster and nobody was watching the ratio.
Should I include taxes in the calculation?
For the basic break-even point, no — you break even at zero profit, and zero profit generates no income tax. Where taxes matter is if you are calculating a target profit break-even: to clear a specific after-tax amount, you need to gross that target up by your tax rate first, then add it to fixed costs before dividing by the margin.
What is a good margin of safety above break-even?
The margin of safety is how far current sales sit above break-even, expressed as a percentage. Selling 300 units against a break-even of 200 gives a 33% margin of safety — sales could fall by a third before you start losing money. Under 20% is fragile; a single bad month puts you underwater. Above 50% is comfortable and gives room to invest rather than react.