Break-Even Calculator
Calculate the break-even point for your business or product.
โน๏ธAbout This Calculator
Your monthly rent, salaries, and software cost $8,000. You sell a product for $60 and each unit costs $20 to make. That's $40 profit per sale โ meaning you need to sell 200 units per month just to cover costs. Unit 201 is where you actually start making money. That number โ 200 โ is your break-even point, and knowing it before you launch, hire, or sign a lease is the difference between a business decision and a gamble. This calculator takes your fixed costs, price per unit, and variable cost per unit, and tells you exactly how many sales it takes to stop losing money. Below that number, you're burning cash. Above it, every sale is profit.
Frequently Asked Questions
What is the break-even formula?
Break-Even Units = Fixed Costs รท (Price per Unit - Variable Cost per Unit). The "Price minus Variable Cost" part is called the contribution margin โ it's how much each sale contributes toward covering your overhead. $8,000 fixed costs, $60 price, $20 variable cost = $40 contribution margin = 200 units to break even. Simple math, but a shocking number of businesses never run it.
What are fixed costs vs. variable costs?
Fixed costs stay the same whether you sell 0 units or 10,000: rent, salaries, insurance, loan payments, software subscriptions. Variable costs scale with each sale: materials, shipping, payment processing (2-3%), packaging, sales commissions. Some costs are semi-variable โ utilities go up slightly with production, overtime kicks in during busy months. When you're not sure how to classify something, call it fixed. Overestimating break-even is safer than underestimating it.
What is contribution margin and why does it matter?
It's the money left from each sale after you cover that sale's variable costs. Sell a $60 item with $20 in variable costs? $40 contribution margin. That $40 goes toward paying your fixed overhead. Once fixed costs are covered, the next $40 is pure profit. Software and consulting have huge margins (70-90%) so they break even fast. Grocery and manufacturing have thin margins (20-30%) so they need volume. If your margin is low, your only path to profit is selling a lot.
How can I lower my break-even point?
Three levers, in order of how scary they feel vs. how effective they are: (1) Raise prices. Most businesses are undercharging. A 15% price increase with even a small volume drop usually improves total profit. (2) Cut fixed costs โ renegotiate rent, cancel software you barely use, examine every recurring charge. (3) Reduce variable costs โ negotiate with suppliers, optimize shipping, reduce returns. Raising prices is the fastest lever but the one everyone avoids.
How do I use break-even analysis for business decisions?
Before you hire someone: add their salary to fixed costs and recalculate. How many more units does that person need to generate to justify the cost? Before signing a lease: same thing. For pricing decisions: run the calculator at $50, $60, $70 โ see how each price changes your break-even. For a new product: if the break-even is 500 units/month and your total addressable market is 1,000 people, that's a risky bet.
What is a realistic break-even timeline for a new business?
Freelancing and consulting: 1-6 months (low overhead). SaaS: 18-36 months. E-commerce: 6-18 months. Restaurants: 2-4 years (the margins are brutal). Brick-and-mortar retail: 1-3 years. The pattern: more fixed costs = longer to break even. Having 6-12 months of expenses as startup capital is the difference between surviving long enough to reach profitability and shutting down right before you would have made it.