Break-Even Calculator
Calculate the UK break-even point in units and revenue.
What this calculator does
This break-even calculator finds the sales volume at which your business stops making a loss and starts making a profit. Enter your fixed overheads for a period, the revenue you receive per unit, and the variable cost of supplying that unit, and it returns the units you need to sell, the turnover that represents, and the contribution each sale makes.
What you get is a floor rather than a goal. It marks the level below which trading consumes cash, which makes it the first figure to establish before signing a lease, taking on staff, or conceding a discount that a customer has asked for.
When to use it
Use it before committing to any new fixed overhead. A £2,000 monthly unit is not really a property decision — it is a question of whether you can sell the additional volume that rent demands, and break-even translates one into the other. The same logic applies to a hire, a van on finance, or an agency retainer.
It is just as useful as a tool for declining things. When a buyer asks for 15 percent off, running the reduced price through the calculator reveals how much extra volume that concession requires. Frequently the answer exceeds anything the account could realistically deliver, which settles the negotiation on facts rather than feel.
Understanding the inputs
Fixed costs are everything payable whether or not you sell anything — rent, business rates, salaries and employer National Insurance, insurance, software, finance repayments. Understating them is the single most common reason a break-even figure disappoints, so err on the generous side and include any salary you draw yourself.
Revenue per unit should be what you actually receive, net of VAT, discounts and returns, rather than the list price. Variable cost covers materials, packaging, carriage, card fees and commission. Keep an eye on the gap: once contribution falls below roughly a quarter of the selling price, fixed overheads become very difficult to absorb at achievable volumes.
How is this calculated?
Break-Even Units = Fixed Costs / (Price − Variable Cost). Break-Even Revenue = Fixed Costs / ((Price − Variable Cost) / Price).
A worked example
A small producer carries £12,000 of fixed overheads a month, sells at £38 per unit excluding VAT, and spends £15 per unit on materials and carriage. Contribution margin is £23, so break-even sits at roughly 522 units a month, or about £19,800 of turnover. Below that the business is funding itself from reserves.
Lift the price to £41 and contribution rises to £26, dropping break-even to around 462 units — 60 fewer sales a month from a rise of under 8 percent. Trimming £1,500 from overheads instead would move break-even to about 457 units, showing that cost discipline and pricing can be near-equivalent levers.
Limitations and assumptions
The model assumes a constant variable cost per unit and a straight-line relationship between volume and turnover. Reality is steppier: bulk buying reduces unit costs at scale while overtime and express carriage push them up, and fixed overheads jump rather than glide as you outgrow premises or a team.
It says nothing about timing, working capital, or whether demand exists for the volume it calculates. If your business carries stock or invoices on credit terms, pair it with a cash-flow projection. Where the figure will support a finance application or accounts prepared for Companies House, have your accountant confirm how you have classified costs.
Common Questions
- What is contribution margin and why does it matter more than price?
- Contribution margin is selling price minus variable cost — the cash each sale leaves to cover fixed overheads. It drives the entire calculation. A product contributing £23 clears fixed costs twice as fast as one contributing £11, however the headline prices compare. Margin per unit, not price, is what pays the rent.
- Should I use VAT-inclusive or VAT-exclusive figures?
- Always exclusive, if you are VAT-registered. VAT you charge is collected on HMRC's behalf and never belongs to the business, so including it inflates revenue per unit and understates your true break-even volume. If you are below the registration threshold and not registered, use the gross figures you actually keep.
- What counts as a fixed cost versus a variable cost?
- Fixed costs do not move with volume: rent, business rates, salaried staff, insurance, software, finance repayments. Variable costs scale per unit: materials, packaging, carriage, card processing fees, piece-rate labour. Sales commission is variable even though it feels like overhead, so group it with unit costs rather than overheads.
- How do I apply this when I sell many different lines?
- Use a blended margin. Take total turnover less total variable costs, divide by turnover, and apply that ratio to your fixed costs. The result is break-even expressed in pounds of turnover rather than units, which is the more practical figure for a retailer or wholesaler with a broad range.
- What if my contribution margin is negative?
- Then no volume breaks even — each additional sale deepens the loss. The calculator cannot return a meaningful figure, and that is the honest result. Growth will not rescue it. The options are a price rise, cheaper supply, or withdrawing the line entirely, and the third is often the right one.
- Where should I put my own director's salary?
- If you pay yourself through PAYE, treat it as a fixed cost — leaving it out makes break-even look better than it is by treating your own time as free. If you take most of your income as dividends, exclude it, but recognise that reaching break-even then leaves you personally unpaid.
- Does break-even help me decide on a discount request?
- Directly. Enter the discounted price and see how the required volume moves. A 15 percent discount on a thin margin can double the units you need to sell. When a buyer asks for terms, that recalculated volume is the number to put in front of them rather than arguing about principle.
- How does break-even differ from a cash-flow forecast?
- Break-even is a static threshold built on accruals and assumes customers pay at the point of sale. Cash flow deals with timing. A business trading above break-even can still run out of money when invoices settle at 60 days, so use both together — one for viability, one for survival.
- How often should I recalculate it?
- Whenever a fixed cost changes materially — a rent review, a hire, an insurance renewal — and quarterly as a matter of routine. Overheads and input prices creep upward almost invisibly, and a break-even figure calculated a year ago is nearly always more optimistic than current reality justifies.