Break-even calculator
Find out how many units you need to sell before your business stops losing money. The chart shows where revenue crosses total costs, and the table shows your profit or loss at sales levels on either side.
Uses a standard published formula, explained below. Everything is calculated in your browser, and nothing you enter is sent to a server. This is not financial advice.
Costs and pricing
Break-even point
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Break-even revenue
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Contribution per unit
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Contribution margin ratio
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| Volume | Revenue | Profit or loss |
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Show the working
—How the break-even point works
Every unit you sell contributes something toward your fixed costs. Divide your fixed costs by that contribution and you get the number of units you need to sell to cover them.
Break-even units = Fixed costs ÷ (Price − Variable cost per unit)
The part in brackets is called the contribution margin, and it is the number to watch. It is not profit. It is the amount each sale adds toward your overheads before any profit is made.
Separating fixed and variable costs
If you put costs in the wrong group, the whole calculation is wrong, and the split is not always obvious.
Fixed costs stay the same however much you sell. Examples include rent, salaried staff, insurance, software subscriptions and loan repayments. You pay them whether you sell nothing or sell out.
Variable costs rise with every unit you sell. Examples include materials, packaging, card payment fees, delivery and sales commission.
Some costs fall in between. An electricity bill often has a fixed standing charge plus a charge for usage, and staff on a basic wage plus commission are partly fixed and partly variable. Split these costs where you can. Where you cannot, count the uncertain part as fixed. That gives a slightly higher break-even point, which is the safer mistake to make.
Why the contribution margin ratio matters
The contribution margin ratio is the contribution margin divided by the price, shown as a percentage. It tells you how much of every sale is left to cover your overheads, and it decides how sensitive your business is to changes in sales.
A business with a 60% contribution margin covers its fixed costs quickly and becomes very profitable once it passes break-even. A business with a 15% margin needs a very large number of sales, and even a small shortfall turns into a serious loss. This effect is called operating leverage, and it explains why some businesses swing sharply between profit and loss while others stay steady.
Using break-even to make pricing decisions
Try the calculator with a lower price and watch the break-even point rise. This is the number to look at before you offer any discount.
If your contribution margin is 40%, cutting your price by 10% does not reduce your profit by 10%. It reduces your contribution by a quarter, so you need to sell about a third more units just to stay where you were. Discounts cost far more than they appear to, and the thinner your margin, the bigger the effect.
The same logic works in reverse, and it is the strongest argument for raising prices. When margins are thin, even a small price increase lowers your break-even point a lot.
Not business advice. This is a simple model for one product, with costs and prices that stay the same. Real businesses deal with bulk discounts, costs that rise in steps, seasonal sales and a mix of products. Use it as a starting point, not a plan.
Frequently asked questions
What is the break-even point?
It is the level of sales at which your total revenue exactly equals your total costs. Below it you make a loss, above it you make a profit, and at the break-even point you make neither.
How do I calculate my break-even point in units?
Divide your fixed costs by the difference between your selling price and your variable cost per unit. For example, with fixed costs of 50,000, a price of 100 and a variable cost of 60, you need to sell 1,250 units.
What is the difference between fixed and variable costs?
Fixed costs, such as rent, salaries and insurance, stay the same however much you sell. Variable costs, such as materials, packaging and payment fees, are paid for each unit you sell.
What is contribution margin?
Contribution margin is the selling price minus the variable cost of one unit. It is the amount each sale adds toward your fixed costs, and it only becomes profit once those costs are fully covered.
How can I lower my break-even point?
Reduce your fixed costs, reduce your variable cost per unit or raise your price. Raising the price usually has the biggest effect, because it increases the contribution from every sale.
Why does a small discount need so many extra sales?
Because the whole discount comes out of your contribution margin. A 10% price cut when your margin is 40% removes a quarter of your contribution, so you need about a third more sales to make up for it.
Does break-even analysis work for a service business?
Yes, as long as you can define a unit, such as a billable hour, a client or a project. Your fixed costs are your overheads, and your variable costs are whatever you spend to deliver each unit.