Break-Even Calculator
Work out how many units you need to sell — and how much revenue you need — before your business starts making a profit.
Revenue vs Total Cost
Break-Even Breakdown
Break-Even Calculator
Our Break-Even Calculator helps you work out how many units you need to sell — and how much revenue you need to generate — before a product or business covers its costs and starts making a profit. Enter your fixed costs, variable cost per unit and selling price to see your break-even point, contribution margin and, if you enter an expected sales volume, your margin of safety.
How to Use This Calculator
- Enter your fixed costs – costs that don’t change with how much you sell, such as rent, salaries, insurance and software subscriptions. Choose whether the figure is monthly or yearly.
- Enter your variable cost per unit – the cost that scales directly with each sale, such as materials, packaging or a per-item supplier charge.
- Enter your selling price per unit – the price you charge the customer for one unit.
- Optionally, enter your current or expected sales volume to see your margin of safety and estimated profit or loss.
- Optionally, enter a target profit to see how many units and how much revenue you’d need to hit that goal.
- Click Calculate Break-Even to see your results.
What Is Break-Even Analysis?
Break-even analysis identifies the point at which total revenue equals total costs, meaning there is neither profit nor loss. Below this point a business or product is operating at a loss; above it, each additional sale contributes to profit. It’s one of the most commonly used tools for pricing decisions, budgeting and assessing whether a new product or venture is financially viable.
How Is the Break-Even Point Calculated?
The break-even point in units is calculated by dividing total fixed costs by the contribution margin per unit:
| Term | Meaning |
|---|---|
| Fixed Costs | Costs that stay the same regardless of sales volume (rent, salaries, insurance) |
| Variable Cost Per Unit | Cost that changes directly with each unit sold (materials, packaging) |
| Selling Price Per Unit | The price charged to the customer per unit |
| Contribution Margin Per Unit | Selling Price minus Variable Cost – the amount each sale contributes to fixed costs |
| Break-Even Point (Units) | Fixed Costs ÷ Contribution Margin Per Unit |
What Is Contribution Margin?
Contribution margin is the amount left from each sale after variable costs are covered. It can be expressed as a value per unit (selling price minus variable cost) or as a ratio (contribution margin divided by selling price, shown as a percentage). A higher contribution margin ratio means fewer units need to be sold to cover fixed costs.
What Is Margin of Safety?
Margin of safety measures how far your current or expected sales sit above the break-even point. It’s expressed both in units and as a percentage of expected sales. A larger margin of safety means more of a buffer before a drop in sales would push the business into a loss; a small or negative margin of safety signals that sales are close to, or below, the break-even level.
What If My Selling Price Is Lower Than My Variable Cost?
If your variable cost per unit is equal to or higher than your selling price, there is no positive contribution margin – every unit sold loses money before fixed costs are even considered, so no break-even point exists. In this situation, this calculator will show a warning instead of a result. You would need to raise your price, reduce your variable cost, or both, for break-even analysis to apply.
Limitations of Break-Even Analysis
- It’s a planning model, not a guarantee. Real-world sales depend on demand, competition and market conditions that this calculator doesn’t account for.
- Fixed and variable costs can change. Rent, staff costs, and supplier prices can rise or fall over time, shifting the break-even point.
- It assumes a single product or an averaged price/cost. Businesses selling multiple products at different margins may need a weighted or product-by-product analysis.
- It doesn’t factor in capacity constraints. The calculation assumes you’re able to produce and sell as many units as needed to reach break-even.
- Service businesses may need to adapt the inputs. “Units” can represent hours billed, clients served, or any other consistent unit of sale.
Frequently Asked Questions
What is break-even analysis?
Break-even analysis identifies the point at which total revenue equals total costs, meaning there is neither profit nor loss. Below this point a business or product is operating at a loss; above it, each additional sale contributes to profit. It’s one of the most commonly used tools for pricing decisions, budgeting and assessing whether a new product or venture is financially viable.
How is the break-even point calculated?
The break-even point in units is calculated by dividing total fixed costs by the contribution margin per unit (selling price minus variable cost per unit). Multiplying the break-even units by the selling price gives the break-even point in revenue.
What is contribution margin?
Contribution margin is the amount left from each sale after variable costs are covered. It can be expressed as a value per unit (selling price minus variable cost) or as a ratio (contribution margin divided by selling price, shown as a percentage). A higher contribution margin ratio means fewer units need to be sold to cover fixed costs.
What is margin of safety?
Margin of safety measures how far your current or expected sales sit above the break-even point. It’s expressed both in units and as a percentage of expected sales. A larger margin of safety means more of a buffer before a drop in sales would push the business into a loss; a small or negative margin of safety signals that sales are close to, or below, the break-even level.
What if my selling price is lower than my variable cost?
If your variable cost per unit is equal to or higher than your selling price, there is no positive contribution margin – every unit sold loses money before fixed costs are even considered, so no break-even point exists. In this situation, this calculator will show a warning instead of a result. You would need to raise your price, reduce your variable cost, or both, for break-even analysis to apply.
Does break-even analysis guarantee profitability?
No. Break-even analysis is a planning model based on the figures you enter – it does not account for market demand, competition, capacity constraints, seasonality, or changes in costs over time. Selling above the break-even point in this model suggests profitability under the assumptions used, but actual results depend on real-world conditions.