Break-Even Calculator
Find out exactly how many units you need to sell to cover all your costs. Enter your fixed costs, variable cost per unit, and selling price to see your break-even point, contribution margin, and revenue target.
Rent, salaries, insurance, subscriptions
Materials, shipping, processing fees
What you charge per unit sold
Break-Even Units
167
units per month
Break-Even Revenue
$8,350
monthly revenue needed
Contribution Margin per Unit
$30.00
Contribution Margin %
60.0%
Profit at Different Volumes
50% of BE
-$2,500
Break-Even
$0
150% of BE
+$2,500
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How to Use Break-Even Analysis for Your Business
Break-even analysis answers the most basic question every business owner faces: how much do I need to sell before I start making money? Whether you are launching a new product, adjusting prices, or evaluating whether a business idea is viable, the break-even point gives you a concrete target to aim for.
The formula is straightforward. Take your total monthly fixed costs and divide by the contribution margin per unit (selling price minus variable cost per unit). The result is the number of units you must sell each month to cover every expense. Multiply that number by your price and you have the revenue target.
Why Contribution Margin Matters
Contribution margin is the real engine of profitability. It represents the amount each sale contributes toward paying off fixed costs. Once you have sold enough units to cover those fixed costs, every additional unit sold adds its full contribution margin directly to your profit. A product with a 60% contribution margin reaches profitability much faster than one at 20%, even if the 20% product has a higher price tag.
Practical Applications
Use break-even analysis when setting prices for a new product, deciding whether to hire an employee (which raises fixed costs), or negotiating with suppliers (which changes variable costs). It is also essential for loan applications and investor pitches, because it shows exactly when a venture becomes self-sustaining.
For service businesses, replace "units" with billable hours or client engagements. A freelance designer with $3,000 in monthly fixed costs and a $100/hour rate with $15/hour in variable costs breaks even at roughly 35 hours per month. Anything beyond that is profit.
Limitations to Keep in Mind
Break-even analysis assumes a single product at a constant price and constant variable cost. In practice, most businesses sell multiple products, offer volume discounts, and see variable costs shift with scale. Use the calculator as a planning baseline, then refine with a full cash flow forecast that accounts for timing, seasonality, and growth.
Frequently Asked Questions
What is the break-even point?
The break-even point is the number of units you must sell (or the total revenue you must earn) so that your total costs exactly equal your total income. Below break-even you operate at a loss; above it you begin generating profit. It is one of the most fundamental metrics in business planning and pricing strategy.
How do I calculate break-even units?
Divide your total fixed costs by the contribution margin per unit. The contribution margin per unit is your selling price minus the variable cost per unit. For example, if fixed costs are $5,000/month, the price is $50, and variable cost is $20, the contribution margin is $30 and break-even is 167 units ($5,000 / $30).
What counts as a fixed cost vs. a variable cost?
Fixed costs stay the same regardless of how many units you sell — rent, salaries, insurance, and software subscriptions are common examples. Variable costs change in proportion to production volume — materials, shipping, payment processing fees, and sales commissions are typical variable costs.
Can I use break-even analysis for a service business?
Yes. Replace "units" with billable hours, projects, or client engagements. Your fixed costs remain the same, and the variable cost per unit becomes the direct cost to deliver one hour or project (subcontractor fees, materials, etc.). The math works identically.
How does contribution margin affect profitability?
Contribution margin is the portion of each sale that goes toward covering fixed costs and then profit. A higher contribution margin means you reach break-even faster and earn more on every unit sold after that point. Businesses improve contribution margin by raising prices, reducing variable costs, or both.
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