How to use the break-even calculator
- Enter your fixed costs for the period you are planning, such as rent and salaries.
- Enter the price per unit and the variable cost per unit (materials, fees, shipping).
- Add a target profit in More options to see the sales goal for it.
- Read the units and sales needed. Download the price sensitivity table as CSV if you want.
Formula
Contribution margin per unit = price - variable cost
Break-even units = fixed costs / contribution margin (rounded up)
Break-even sales = units x price
Units for a profit target = (fixed costs + target profit) / contribution margin
Units are rounded up because you cannot sell a fraction of a unit, and selling one fewer would leave you just short.
Worked example: a small product business
Fixed costs are $12,000 a month. You sell at $45.00 with $18.00 of variable cost per unit, so each sale contributes $27.00.
Break-even units: $12,000 / $27 = 444.44, so 445 units, and sales of 445 x $45 = $20,025.
To earn $3,000 profit as well: ($12,000 + $3,000) / $27 = 555.56, so 556 units.
Reading the sensitivity table
The table shows break-even units if you changed the price by 10 or 20 percent. Small price changes can move the break-even point a lot because the contribution margin is a small slice of the price.
Limits of the simple model
Break-even analysis works best for one product at a steady price. With several products at different margins, use the average contribution margin weighted by your expected sales mix, or run the calculator for each product with its share of fixed costs. It also assumes you can sell all the units you plan to, so test the result against realistic demand.
Assumptions and limits
- Price and variable cost per unit are constant, which is an approximation.
- Fixed costs stay fixed over the range of sales. In practice, large growth can add costs.
- The price must be higher than the variable cost, or you can never break even.
- Taxes and the time value of money are ignored.
Frequently asked questions
What does break-even mean?
The point where total revenue equals total costs, so profit is zero. Every sale after it adds to profit.
What is a contribution margin?
What each sale contributes toward fixed costs after paying its own variable cost.
How can I lower my break-even point?
Raise the price, cut variable costs or reduce fixed costs. Use the profit margin calculator to see how pricing changes affect margin.