⚖️ Break-Even Calculator
Calculate the exact number of units you need to sell — and the revenue required — to cover all your costs and break even.
How to Calculate Your Break-Even Point
The break-even point is the number of units you must sell for total revenue to equal total costs — the point at which you make exactly $0 profit and $0 loss. Every unit sold beyond break-even generates pure profit equal to the contribution margin. The formula is: Break-Even Units = Fixed Costs ÷ Contribution Margin per Unit, where Contribution Margin = Selling Price − Variable Cost per Unit.
Break-Even Formula Explained
Contribution Margin (CM) = Selling Price − Variable Cost per Unit. This is the amount each sale contributes toward covering fixed costs and, once break-even is reached, generating profit. Break-Even Units = Fixed Costs ÷ CM. Break-Even Revenue = Break-Even Units × Selling Price. Example: Fixed costs $5,000/mo, variable cost $12/unit, price $30. CM = $18. Break-even = 5,000 ÷ 18 = 278 units or $8,333 in revenue.
Margin of Safety — How Far Above Break-Even Are You?
The margin of safety measures how much your actual or forecast sales exceed the break-even point. If you expect to sell 400 units and break-even is 278, your margin of safety is 122 units (or 30.5%). A higher margin of safety means more buffer against a sales downturn before you start losing money. Most businesses target a margin of safety above 20–25% to absorb seasonal swings and unexpected costs.
People Also Ask
Break-Even Units = Fixed Costs ÷ (Selling Price − Variable Cost per Unit). The denominator (Selling Price − Variable Cost) is called the Contribution Margin — the amount each sale contributes to covering fixed costs. Break-Even Revenue = Break-Even Units × Selling Price.
Fixed costs stay the same regardless of how much you sell — rent, salaries, insurance, software subscriptions, loan payments. Variable costs increase with each unit produced or sold — raw materials, packaging, production labor, shipping, sales commissions, payment processing fees. Some costs (like utilities) are semi-variable and need to be split between the two categories.
Three levers: (1) Reduce fixed costs — renegotiate rent, cut subscriptions, reduce headcount. (2) Reduce variable costs — negotiate better supplier pricing, optimize packaging, reduce shipping cost. (3) Raise selling price — even a small price increase has a large impact since the full increase goes directly to contribution margin. A 10% price increase on a product with 40% gross margin improves margin by 25%.
Contribution margin ratio (CM ÷ Selling Price) benchmarks vary widely by industry. Software and digital products often exceed 80% since variable costs are near zero. Physical product businesses typically see 30–60%. Restaurants often run 60–70% food CM but have high fixed overhead. A ratio above 50% is generally considered healthy for a product business.