Break-Even Calculator

How to Use This Break-Even Calculator

• Fixed Costs — costs that do not change with sales volume: rent, salaries, insurance, software.
• Price per Unit — what you charge customers for one unit.
• Variable Cost per Unit — the direct cost of producing/delivering one unit.
• Expected Units — optional; lets you see your margin of safety above break-even.

What Is a Break-Even Point?

Your break-even point is the level of sales at which total revenue exactly equals total costs — you make neither a profit nor a loss. Below it you are losing money; above it, every additional sale contributes to profit. Knowing this number is essential before launching a product, setting prices, or taking on new fixed costs.

The engine behind break-even is contribution margin — the amount each sale contributes toward covering fixed costs after variable costs are paid. The higher your contribution margin, the fewer units you need to break even. The margin of safety then shows how far your expected sales sit above break-even, which is a direct measure of how much cushion you have before you start losing money.

Break-Even Formula

How to Calculate Your Break-Even Point (Step by Step)

• Step 1 — Total your fixed costs per month: rent, salaries, insurance, software — everything you pay regardless of sales.
• Step 2 — Find contribution margin per unit: selling price minus variable cost per unit. Sell at $50 with $20 of variable cost → $30 contribution per unit.
• Step 3 — Divide: Break-Even Units = Fixed Costs ÷ Contribution Margin. $15,000 ÷ $30 = 500 units per month to break even.
• Step 4 — Convert to revenue if you prefer dollars: Break-Even Revenue = Fixed Costs ÷ Contribution Margin Ratio (contribution ÷ price). $15,000 ÷ 0.60 = $25,000/month.

Anything above that line is profit; below it you're funding losses. If the number looks unreachable, the levers are price, variable cost, or fixed overhead — the calculator above lets you test all three instantly.

Example Calculation

Fixed costs of $40,000, price of $50, variable cost of $30:

• Contribution margin = $50 − $30 = $20
• Break-even units = $40,000 ÷ $20 = 2,000 units
• Break-even revenue = 2,000 × $50 = $100,000

If you expect to sell 3,000 units, your margin of safety is (3,000 − 2,000) ÷ 3,000 = 33% — sales could drop a third before you hit a loss.

Common Mistakes to Avoid

• Miscategorizing costs. Putting a variable cost in fixed costs (or vice versa) throws off the whole calculation.
• Forgetting your own salary. Owner pay is a real cost — include it in fixed costs.
• Ignoring price changes. Discounts lower contribution margin and raise your break-even point fast.
• Assuming one price. If you sell a mix of products, calculate a blended contribution margin.
• Treating break-even as the goal. Break-even is survival; your real target is the sales level that funds growth.

Break-Even for Small Business & Startups

Break-even analysis is one of the first things a fractional CFO runs for a new product, location, or pricing change — because it answers the most important question before you spend: how much do we have to sell just to not lose money? For startups, it also reveals how price and cost structure decisions ripple through the whole model.

If your break-even feels uncomfortably high, the levers are clear: raise price, cut variable costs, or reduce fixed overhead. Knowing which lever to pull — and by how much — is exactly the kind of analysis our team does every day. If you want help turning this number into a pricing and profit plan, let\'s talk.

Frequently Asked Questions

Related Free Tools