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Break-Even Point Calculator

The break-even point is the sales volume at which revenue exactly covers all costs. Below it, every sale deepens the loss; above it, every sale is profit. Knowing this one number tells you whether a price is viable, how much room you have to discount, and what a realistic sales target must be.

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Break-even units500
Break-even revenue$25,000
Contribution per unit$20
Contribution margin40%

How break-even is calculated

Each unit sold contributes its price minus its variable cost toward covering fixed costs. That difference is the contribution margin. Break-even units = fixed costs ÷ contribution margin per unit.

With 10,000 in fixed costs, a 50 price and a 30 variable cost, each sale contributes 20, so you need 500 units, which is 25,000 in revenue. Fixed costs are those that do not change with volume: rent, salaries, software, insurance. Variable costs scale with each unit: materials, packaging, shipping, transaction fees.

Using it for pricing decisions

Price changes move break-even dramatically and asymmetrically. Raising the example price 10% to 55 cuts the target from 500 to 400 units. Discounting 10% to 45 raises it to 667 units, one third more sales just to stand still. Run any planned discount through this calculator before offering it.

The same math yields your margin of safety: if current sales are 800 units against a 500-unit break-even, sales can fall 37% before you lose money. A thin margin of safety argues for cutting fixed costs rather than pushing volume.

Frequently asked questions

What counts as fixed versus variable cost?

Fixed costs stay the same whether you sell 10 units or 1,000: rent, salaries, subscriptions. Variable costs are incurred per unit: materials, shipping, payment fees. If a cost rises with every sale, it is variable.

What is contribution margin?

Selling price minus variable cost per unit: what each sale contributes toward fixed costs and, beyond break-even, profit.

What if my price is below my variable cost?

Every sale then loses money and no volume can ever break even. You must raise the price or cut unit costs.

Does this work for services?

Yes. Treat an hour or a project as the unit, your fee as the price, and per-delivery costs as variable costs.

Should I include my own salary in fixed costs?

For an honest picture, yes. A business that only breaks even by not paying its founder has not truly broken even.

How do taxes fit in?

Break-even is calculated before profit taxes, since below break-even there is no profit to tax. Include payroll and fixed business taxes in fixed costs.

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