Business planning
Break-Even Calculator
Estimate the number of sales required to cover fixed and variable costs, along with break-even revenue and contribution margin.
Your business costs
Use the same time period for all costs.
Break-even estimate
The minimum whole-unit sales needed to cover fixed costs.
- Break-even units
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- Revenue at break-even
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- Contribution per unit
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- Contribution margin ratio
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Rounded up to a whole unit.
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Understanding your results
The break-even point is the sales volume where total revenue covers the costs included in your model. It does not mean your business is guaranteed to be profitable above that volume: actual demand, discounts and changing costs can affect the outcome.
Example: Suppose fixed costs total $1,200, each product sells for $50, and each product costs $30 to deliver. The contribution margin is $20, so you need to sell 60 units and generate $3,000 of revenue to cover those modeled expenses.
Step-by-step break-even analysis
Break-even analysis separates expenses that remain roughly constant from costs caused by each sale. It can help you set a minimum sales target, but it does not predict actual demand or account for every possible expense.
- Choose a time period. For example, use your monthly rent and other monthly fixed costs, not a mix of monthly and annual totals.
- Determine contribution per unit. Subtract variable cost per sale from your unit selling price.
- Divide fixed costs by contribution. This produces the theoretical number of units to cover fixed costs.
- Round up for indivisible products. If you need 54.55 units, selling only 54 does not cover the modeled expenses; your practical target is 55.
| Example variable | Amount | Meaning |
|---|---|---|
| Monthly fixed costs | $1,200 | Rent, fixed software costs, etc. |
| Price per sale | $50 | Revenue from one unit |
| Variable cost | $30 | Per-unit production and handling |
| Required unit sales | 60 | $1,200 ÷ ($50 − $30) |
What if variable cost is higher than selling price?
Each sale would contribute zero or a negative amount toward your fixed costs, so increasing sales cannot cover them under this simplified model. You would need a different selling price or cost structure. When fixed costs are zero and contribution per sale is positive, the estimated break-even unit count is zero.
Limitations to remember
The formula assumes a consistent selling price and variable cost per unit. Real businesses often have discounts, changing input costs, taxes and multiple products with different contribution margins. For a multi-product business, calculate a weighted contribution margin or model each product separately.
How do you calculate the break-even point?
Break-even units = Fixed costs ÷ (Price per unit − Variable cost per unit)
Subtract the variable cost of each sale from the selling price to find the contribution margin. Divide your fixed costs by this amount to estimate how many units you need to sell. For whole products, round up to the next whole unit to cover your fixed costs. This is a simplified cost-volume-profit model and assumes that unit prices and costs remain constant.