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No. 03Profitability

Break-Even Calculator

Find out how many units you need to sell — and how much revenue you need — to cover your fixed costs, plus what it takes to reach a profit target. Sell several products or services? Add each one to find break-even at your sales mix.

Work out break-even for

Rent, salaries, insurance — costs that don’t change with sales volume.

Materials, packaging, payment fees — costs for each unit sold.

Leave at 0 to see pure break-even.

Results

Break-even point

500 units

  • Revenue
  • Total cost
$0$10K$20K$30K$40K0 units200 units400 units600 units800 unitsUnits soldBreak-even · 500
Break-even revenue
$25,000.00
Contribution margin per unitPrice minus variable cost: what each sale leaves to pay fixed costs
$20.00
Contribution margin ratioShare of each sales dollar left after variable costs
40%
Show the calculation
  1. Contribution margin$50.00 − $30.00= $20.00
  2. Break-even units$10,000.00 ÷ $20.00 → round up= 500
  3. Break-even revenue500 × $50.00= $25,000.00

Starting a business? Carry your price, cost per unit and fixed costs (as monthly costs) into the Business Idea Check. It adds your pay, startup cash and the first months.

Break-even units: price vs. variable cost

How the break-even point moves if price or variable cost changes by up to 20%.

Break-even units: price vs. variable cost: rows are Price, columns are Variable cost
Price ↓ · Variable cost →$24.00$27.00$30.00$33.00$36.00
$40.006257701,0001,4292,500
$45.004775566678341,112
$50.00385435500589715
$55.00323358400455527
$60.00278304334371417

How it’s calculated

Contribution Margin
equals Price − Variable Cost per Unit
Break-even Units
equals Fixed Costs ÷ Contribution Margin
Break-even Revenue
equals Break-even Units × Price
Units for Target Profit
equals (Fixed Costs + Target Profit) ÷ Contribution Margin
Break-even Sales, several items
equals Fixed Costs ÷ (Total Contribution ÷ Total Expected Sales)

Contribution margin is what each sale contributes toward fixed costs after paying for itself. Once enough sales have covered the fixed costs, every additional contribution margin dollar is profit. Unit counts are rounded up, because you can’t sell part of a unit.

Worked example

A coffee cart has $8,400 a month in fixed costs (permit, vehicle lease, insurance, the owner’s draw). The average drink sells for $4.50 and costs $1.30 in beans, milk, cup and card fees.

  1. Contribution margin = $4.50 − $1.30 = $3.20 per drink (71.11% of price)
  2. Break-even = $8,400 ÷ $3.20 = 2,625 drinks
  3. Break-even revenue = 2,625 × $4.50 = $11,812.50
  4. To earn $3,000 profit: ($8,400 + $3,000) ÷ $3.20 = 3,562.5, rounded up to 3,563 drinks

Over about 26 trading days, that’s roughly 101 drinks a day just to break even.

Using break-even to make decisions

Break-even analysis is most useful for comparing options. Try raising the price by 10% and watch how far the break-even point falls — a small price change often matters more than a large cost cut. You can also test whether a new fixed cost, like a hire or a lease, is realistic: divide it by your contribution margin to see how many extra sales it requires.

Assumptions and limitations

  • Fixed costs, price and variable cost are assumed constant across the volume range. In reality bulk discounts, overtime or price promotions change them.
  • Use the same period throughout — if fixed costs are monthly, the result is units per month.
  • With several products or services, break-even depends on your sales mix: the “Several products or services” mode works it out at the mix you expect. If the mix changes, so does break-even.
  • If variable cost is equal to or higher than price, no volume of sales will break even; the calculator flags this rather than returning a number.

Results are estimates for information only and are not financial, tax or legal advice. See our disclaimer.