Break Even Calculator

Know Exactly When Your Business Starts Making Money

The break-even point is the moment your revenue exactly covers your costs: no profit yet, but no longer losing money either. Every unit sold beyond that point is profitable. Understanding where that line sits is one of the most fundamental pieces of financial clarity any business owner needs.

How to Use This Calculator

Enter your total fixed costs (expenses that don't change regardless of sales volume), your variable cost per unit (what it costs to produce or deliver each item), and your selling price per unit. Optionally enter your expected sales volume to see your projected profit and margin of safety. Hit Calculate Break Even to see your break-even point in units and revenue.

Fixed vs. Variable Costs

Fixed costs stay the same regardless of how many units you sell. Examples: rent, salaries, software subscriptions, insurance, loan payments, and equipment depreciation. These costs exist whether you sell zero units or ten thousand.

Variable costs change directly with production or sales volume. Examples: raw materials, packaging, shipping, payment processing fees, and sales commissions. The more you sell, the more these cost in total, but each unit costs the same.

Getting this distinction right is critical. Misclassifying a fixed cost as variable (or vice versa) will produce an incorrect break-even calculation.

How the Math Works

The break-even formula is built on the contribution margin (the amount each sale contributes toward covering fixed costs):

Break-even revenue is simply break-even units multiplied by your selling price. Once you've sold enough units to generate revenue equal to your fixed costs, every additional unit sold generates pure profit equal to the contribution margin.

Real-World Example

Using the calculator's defaults: $10,000 fixed costs, $15 variable cost/unit, $25 selling price, 1,500 expected sales:

• Contribution margin: $25 − $15 = $10/unit
• Break-even units: $10,000 ÷ $10 = 1,000 units
• Break-even revenue: 1,000 × $25 = $25,000
• Contribution margin %: $10 ÷ $25 = 40%
• Profit at 1,500 units: (1,500 − 1,000) × $10 = $5,000
• Margin of safety: 500 units (33% above break-even)

At 1,500 units, this business is operating 500 units above break-even, meaning sales could drop by a third before the business loses money. That's a healthy margin of safety.

Contribution Margin and Pricing Decisions

The contribution margin percentage (40% in the example above) tells you how much of every dollar of revenue is available to cover fixed costs and profit. A higher contribution margin means you reach break-even faster and generate more profit per unit sold above it.

This makes the contribution margin a powerful tool for pricing decisions. If you're considering a discount, the question becomes: how many more units would you need to sell to generate the same total contribution? A 10% price cut on a 40% margin product means you need to sell 33% more units just to break even on the change.

Tips for Lowering Your Break-Even Point

• Reduce fixed costs: renegotiate rent, eliminate unused subscriptions, or move to a shared workspace. Fixed cost reductions directly lower break-even.
• Reduce variable costs: negotiate better supplier pricing, improve production efficiency, or find cheaper shipping. Lower variable costs increase contribution margin.
• Raise prices: often the highest-impact lever if your market supports it. Even a 5% price increase on a 40% margin product significantly lowers break-even units.
• Shift fixed to variable: replacing a fixed salary with commission-based pay, or swapping owned equipment for per-use rental, converts fixed costs to variable and lowers your break-even floor.

Frequently Asked Questions