What is the break-even point?

The break-even point is the number of units you must sell to cover all your costs, with no profit and no loss. Below it you make a loss, above it you make a profit. It is found by dividing fixed costs by the contribution margin per unit.

What is contribution margin?

Contribution margin is the selling price per unit minus the variable cost per unit. It is the amount each sale contributes towards your fixed costs and then profit. If the price is below the variable cost, you can never break even.

How do I lower my break-even point?

Raise the price, cut the variable cost per unit, or reduce fixed costs. Each lifts the contribution margin or lowers the costs to cover, so you need fewer sales to break even. The calculator updates instantly so you can test each change.

Break-Even Calculator

This calculator works out how many sales you need to make before your business starts turning a profit, the point where your income exactly covers your costs with nothing left over and nothing lost. Running a business without knowing this number means flying blind, so it is one of the first sums any owner or would-be owner should do. You enter three figures: your fixed costs (rent, salaries, insurance and anything else you pay regardless of sales volume), the price you charge per unit, and the variable cost of making or supplying each unit. From these the calculator works out your contribution margin, the amount each sale leaves over after covering its own variable cost, and uses it to show the break-even point in units and in sales revenue, updating instantly as you adjust any figure. If your price is at or below your variable cost, it warns you that break-even is impossible until you raise the price or cut costs, since every sale would then lose money rather than contribute to it. Use it when setting prices, planning a new product, or checking whether a sales target actually clears your costs. Selling below break-even keeps you in the red regardless of volume, while every sale beyond it becomes profit. Treat the result as a guide, since real costs and prices can shift once you are trading.

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Fixed costs

Price per unit

Variable cost per unit

0 units

to break even

Break-even sales$0

Contribution margin$0

How break-even is calculated

Each sale contributes its price minus its variable cost towards your fixed costs. That is the contribution margin. Divide the fixed costs by the contribution margin per unit and you get the number of units needed to cover everything. Multiply that by the price for the break-even sales figure.

Worked example

With $20,000 of fixed costs, a $50 price, and $30 variable cost, each sale contributes $20. You need 20,000 divided by 20, which is 1,000 units, to break even. That is $50,000 in sales. Every unit after that adds $20 of profit.

Related calculators

Profit Margin Calculator: margin on a sale.
Markup Calculator: markup, margin, and price.
Gross Margin Calculator: gross margin percentage.
Digital Ad Break Even Calculator: break even on ad spend.

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