Break-Even Calculator
Find the sales volume needed to cover all business costs.
What this calculator does
This break-even calculator finds the sales volume at which your business stops losing money and starts making it. Enter your total fixed costs for a period, the revenue you collect per unit, and the variable cost of producing that unit, and it returns the number of units you must sell to cover everything, the revenue that represents, and the contribution margin each sale generates.
The output is a threshold, not a target. It tells you the floor beneath which the business consumes cash, which makes it the first number to establish before setting a sales quota, signing a lease, or agreeing to a discount that a customer has asked for.
When to use it
Reach for it before committing to any fixed cost. A $3,000 monthly lease is not really a lease decision — it is a question of whether you can sell the extra units that lease demands, and break-even converts one into the other. The same applies to hiring, to a new piece of equipment, and to a marketing retainer.
It is equally valuable for pricing decisions and for saying no. When a prospect asks for 15 percent off, running the discounted price through the calculator shows how many more units that concession forces you to sell. Often the answer is a volume the account will never deliver, which turns a hard negotiation into an easy one.
Understanding the inputs
Fixed costs are everything you pay regardless of whether you sell a single unit — rent, salaries, insurance, subscriptions, loan payments. Be generous here; understated fixed costs are the most common reason a break-even figure turns out to be wrong. Include your own salary if you draw one.
Revenue per unit should be the amount you actually collect after discounts and returns, not the list price. Variable cost per unit covers materials, packaging, shipping, payment processing, and any commission. Watch the gap between those two figures: once contribution margin falls below roughly a quarter of your selling price, fixed costs become very hard to absorb at realistic 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 manufacturer carries $18,000 in monthly fixed costs, sells at $45 per unit, and spends $17 per unit on materials and shipping. Contribution margin is $28. Break-even lands at about 643 units a month, or roughly $28,900 in revenue. Below that the business burns cash; above it, each unit drops $28 straight to profit.
Now raise the price to $49 without changing anything else. Contribution margin becomes $32 and break-even falls to about 563 units — 80 fewer sales per month for a price change under 10 percent. Cutting fixed costs by $2,000 instead would move break-even to roughly 571 units, a comparable gain from a completely different lever.
Limitations and assumptions
The model assumes variable cost per unit stays constant and that revenue rises in a straight line. Neither holds perfectly: volume discounts lower unit costs at scale, while overtime and rush shipping raise them. It also treats fixed costs as genuinely fixed, when in practice they step upward as you outgrow a facility or a team.
Break-even says nothing about timing, working capital, or whether the market will absorb the volume it calculates. For a business with heavy inventory or long payment terms, pair it with a cash-flow projection. If the answer will drive a lease, a loan application, or an investor conversation, have an accountant sanity-check your cost classification first.
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 behind to cover fixed costs. It is the engine of the whole calculation. A product with a $28 margin covers fixed costs twice as fast as one with a $14 margin, regardless of how the headline prices compare.
- What counts as a fixed cost versus a variable cost?
- Fixed costs do not move with volume: rent, salaried staff, insurance, software subscriptions, loan payments. Variable costs scale with each unit sold: materials, packaging, shipping, payment processing fees, hourly labor tied to production. Sales commissions are variable even though they feel like overhead, so classify them with the unit costs.
- How do I use break-even when I sell dozens of different products?
- Use a blended contribution margin. Take total revenue minus total variable costs across the whole product line, divide by total revenue, and you get a margin ratio you can apply to fixed costs. That gives break-even in dollars rather than units, which is the more useful figure for a multi-product business.
- Should I use monthly or annual figures?
- Monthly is usually more actionable, because that is the rhythm at which rent and payroll actually hit your bank account. Annual figures are better when your business is seasonal and a single month would mislead. Whichever you pick, keep fixed costs and the resulting unit count on the same period.
- What if my contribution margin is negative?
- Then every additional sale loses money and there is no break-even point at any volume. The calculator will not return a usable figure, and that is the correct answer. Selling more will not fix it. You need a higher price, cheaper inputs, or a decision to discontinue the product.
- Does break-even tell me whether a price increase is worth it?
- Partly. Raising price lifts contribution margin and cuts the units you need, but it usually costs you some volume. Run the calculator at the new price to find the new break-even count, then ask honestly whether you can still sell that many. If yes, the increase is almost certainly worth taking.
- Where does owner salary belong?
- If you draw a regular salary, treat it as a fixed cost — otherwise break-even flatters you by pretending your own time is free. If you take profit distributions instead, leave it out of fixed costs but remember that hitting break-even then means you personally earn nothing that month.
- How is break-even different from a cash-flow forecast?
- Break-even is a static threshold, calculated on accrual figures. It assumes customers pay when they buy. Cash flow tracks timing. A business can pass break-even on paper and still be short of cash if receivables run 60 days, so use the two together rather than either alone.
- How often should I recalculate?
- Any time a fixed cost changes materially — a new lease, a hire, a software renewal — and at least quarterly otherwise. Input costs drift upward quietly, and a break-even point calculated eighteen months ago is usually optimistic by a wider margin than owners expect.