Break-Even Calculator
Find the exact number of units you need to sell — and the revenue you need to generate — before your business starts making a profit. Enter your costs and selling price below.
Rent, salaries, insurance, loan payments — costs that don't change with output.
Materials, packaging, shipping, commissions — costs per unit produced.
Units needed to reach this profit goal.
Results
Break-Even Units
Break-Even Revenue
Contribution Margin
CM Ratio
Units for Target Profit
Revenue for Target Profit
Profit at Various Sales Volumes
| Units Sold | Revenue | Total Costs | Profit / (Loss) |
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What Is Break-Even Analysis?
Break-even analysis tells you the minimum amount you need to sell to cover all your costs — after which every additional unit sold generates pure profit. It's a fundamental planning tool for businesses of any size, from solo freelancers setting project minimums to startups evaluating product viability.
The break-even formula is: Break-Even Units = Fixed Costs ÷ Contribution Margin per Unit, where Contribution Margin = Selling Price − Variable Cost per Unit.
Key Terms Explained
Fixed Costs
Costs that remain constant regardless of how many units you produce or sell. Examples include monthly rent, annual software subscriptions, salaried employee wages, insurance premiums, and loan repayments. Even if you sell zero units, fixed costs must be paid.
Variable Costs
Costs that scale directly with production or sales volume. Examples include raw materials, packaging, payment processing fees, sales commissions, and shipping. If you sell nothing, variable costs are zero.
Contribution Margin
The amount each unit sale contributes toward covering fixed costs and generating profit: Selling Price − Variable Cost per Unit. Once total contributions from all units equal total fixed costs, you've reached break-even. Every unit sold beyond that contributes directly to profit.
Contribution Margin Ratio
The contribution margin expressed as a percentage of the selling price. A 60% CM ratio means $0.60 of every $1.00 in revenue is available to cover fixed costs and profit. To find the break-even revenue directly: Break-Even Revenue = Fixed Costs ÷ CM Ratio.
Practical Example
A small bakery has $3,000/month in fixed costs (rent, utilities, salaries). Each loaf of bread sells for $6.00 and costs $2.50 in ingredients and packaging (variable cost).
- Contribution Margin = $6.00 − $2.50 = $3.50 per loaf
- Break-Even Units = $3,000 ÷ $3.50 = 857 loaves
- Break-Even Revenue = 857 × $6.00 = $5,143/month
The bakery must sell at least 857 loaves per month before it starts making any profit. To get a broader picture of business profitability, pair this with the profit margin calculator.
Frequently Asked Questions
What if my variable costs are hard to pin down?
Estimate conservatively — use the highest reasonable variable cost figure. This gives a more cautious break-even point and builds a buffer against cost overruns. Break-even analysis is a planning tool, not a guarantee; run scenarios with different cost assumptions.
How does pricing affect break-even?
Higher prices increase the contribution margin, which reduces the break-even unit count. Lower prices require you to sell more units to cover fixed costs. Even small price increases can dramatically improve your break-even position if demand remains stable.
Can break-even analysis be used for service businesses?
Yes. For service businesses, the "unit" is typically a billable hour, project, or client. Fixed costs include overhead and salaries; variable costs might include contractor payments or materials. The same formula applies.
Is break-even the same as profitability?
No. Breaking even means you have zero profit and zero loss — you've exactly covered all costs. Profitability requires selling beyond the break-even point. The margin of safety is the gap between your actual sales and the break-even level.
