Break-even calculator
How many units you must sell before the business stops losing money. The chart shows where the revenue line crosses total cost, and the table below runs profit at volumes either side of it.
Built and checked by Mubashir, who works in accounting and finance. Formula and sources shown below. 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
—The idea in one line
Every unit you sell contributes something toward your fixed costs. Divide the fixed costs by that contribution and you have the number of units needed before you are square.
Break-even units = Fixed costs ÷ (Price − Variable cost)
The denominator is the contribution margin, and it is the number to watch. It is not profit — it is what each sale contributes to covering overheads before any profit exists.
Separating fixed from variable
Getting this split wrong invalidates the whole calculation, and it is less obvious than it sounds.
Fixed costs do not change with volume: rent, salaried staff, insurance, software subscriptions, loan payments. You pay them whether you sell nothing or everything.
Variable costs scale with each unit: materials, packaging, payment processing fees, shipping, per-unit commission.
The awkward cases are semi-variable. Electricity has a standing charge plus usage. Staff on a base wage plus commission are partly each. Split them, and if you cannot, treat the ambiguous portion as fixed — that produces a conservative break-even point, which is the safer error.
Why the contribution margin ratio matters more than the unit count
The ratio is contribution divided by price, expressed as a percentage. It tells you what proportion of every sale is available to cover overheads, and it is the figure that determines how sensitive your business is to volume.
A business with a 60% contribution margin covers its fixed costs quickly and turns strongly profitable past break-even. One at 15% needs enormous volume, and a modest shortfall becomes a serious loss. That is operating leverage, and it explains why some businesses swing violently between profit and loss on small revenue changes while others grind along steadily.
Using it for pricing decisions
Run the calculator with a lower price and watch the break-even volume rise. This is the number that should inform any discount decision.
Cutting price by 10% when your contribution margin is 40% does not reduce profit by 10% — it reduces contribution by 25%, so you need a third more volume just to stand still. Discounting is far more expensive than it looks, and the thinner the margin, the more punishing it gets.
The same logic works in reverse and is the strongest argument for raising prices. On thin margins, a small increase moves the break-even point dramatically in your favour.
Not business advice. This is a single-product model assuming constant costs and price. Real businesses face volume discounts, stepped fixed costs, seasonality and product mix. Treat it as a starting frame, not a plan.
Frequently asked questions
What is the break-even point?
The sales volume at which total revenue exactly equals total cost. Below it you lose money, above it you profit, and at it you make nothing.
What is the difference between fixed and variable costs?
Fixed costs stay the same regardless of how much you sell — rent, salaries, insurance. Variable costs are incurred per unit — materials, packaging, transaction fees.
What is contribution margin?
The amount each unit contributes toward fixed costs, calculated as selling price minus variable cost per unit. It is not profit until fixed costs are fully covered.
How do I lower my break-even point?
Reduce fixed costs, reduce variable cost per unit, or raise the price. Raising price usually has the most leverage because it increases contribution directly.
Why does a small discount need so much extra volume?
Because the discount comes entirely out of contribution, not out of revenue proportionally. A 10% price cut on a 40% margin removes a quarter of your contribution, requiring roughly a third more volume to compensate.
Does this work for a service business?
Yes, if you can define a unit — a billable hour, a client, a project. Fixed costs are your overheads and variable costs are whatever you spend delivering each unit.