Break-Even Calculator
Find out how many units you need to sell to cover your costs.
| Units Sold | Revenue | Total Cost | Profit/Loss |
|---|
Break-Even Analysis for Small Business
The break-even point is the sales volume — in units or dollars — where your total revenue exactly equals your total costs, so profit is zero. It is the single most important number to know when you launch a product, open a storefront, or price a service. Below break-even you're losing money on every day of operation; above it, every additional unit drops contribution margin straight into profit.
Most small-business owners discover break-even only after they've already spent months in the red. This calculator lets you run the numbers before you commit — or fix a struggling business by finding out exactly how much volume, price, or cost change is needed to reach profitability.
The analysis rests on a simple but powerful insight: costs divide cleanly into fixed costs (the bill you pay regardless of how much you sell — rent, salaries, insurance) and variable costs (the bill that scales with volume — materials, shipping, processing fees). Once you know both, the math is elementary.
The Formulas
Fixed Costs— total costs that don't change with sales volume (rent, salaries, insurance, software)Price— selling price per unitVariable Cost— cost that scales with each unit sold (materials, shipping, processing fees)- The denominator
(Price − Variable Cost)is the Contribution Margin per unit
CM— dollars each unit contributes to covering fixed costs after paying its own variable costCM Ratio— what percentage of revenue becomes contribution margin (higher = more resilient)
- Answers "how much revenue do I need?" directly, useful for multi-product businesses
- Translates a profit goal into a required monthly sales volume
Worked Example — Marcus's Cupcake Bakery
($5,000 + $3,000) / $12 = 667 units ≈ 22/day. That's his target profit volume.Fixed vs Variable Costs — Classifying Your Expenses
The break-even formula only works if you split your costs cleanly. Use this table to classify a typical small-business expense sheet:
| Cost | Type | Why |
|---|---|---|
| Rent / lease | Fixed | Same whether you sell 0 or 1,000 units |
| Salaried staff | Fixed | Paid regardless of volume |
| Insurance, software, subscriptions | Fixed | Flat monthly charge |
| Equipment lease / depreciation | Fixed | Paid on schedule |
| Raw materials / ingredients | Variable | More units = more materials |
| Packaging / shipping | Variable | One package per unit sold |
| Credit-card processing fees | Variable | 2.5–3% of every sale |
| Hourly production labor | Variable | Only when you're making product |
| Utilities (partial) | Mixed | Base fee + variable usage — split into fixed/variable pieces |
| Sales commissions | Variable | Paid per sale |
Target-Profit Mode: From Break-Even to Goal
Break-even is the floor; most businesses need to know the number that actually puts cash in the owner's pocket. The formula extends naturally:
Using Marcus's bakery numbers with a $3,000 monthly profit target:
- Numerator: $5,000 fixed + $3,000 profit = $8,000
- Denominator: $12 contribution margin
- Result: 667 units/month (about 22 per day)
This single calculation — done before signing the lease — separates viable business plans from wishful thinking. If you can't realistically sell 667 units/month at $15, the business needs a different model.
Break-Even Rules of Thumb
Retail and food businesses typically run 30–50% CM ratios. Software, digital products, and consulting services often run 70–90%. Lower ratios = more sensitivity to volume swings and less room to weather bad months.
If your monthly fixed costs are $5,000, aim for $15,000 in business savings before launch. Break-even rarely happens in month one — runway buys you time to hit the volume.
Rent increase, supplier price change, new hire, new product — re-run the break-even analysis every time. Small changes to fixed costs can shift break-even by 20–30%.
How to Use This Calculator
- Total your monthly fixed costs — every dollar you pay regardless of sales (rent, salaries, insurance, software, equipment leases). Enter the total.
- Calculate your variable cost per unit. Add up materials, packaging, shipping, processing fees, and any labor tied directly to making the unit. Enter as a per-unit dollar amount.
- Enter your selling price per unit. Use the actual average price customers pay, not your MSRP if you discount.
- Enter your expected monthly sales volume to see the projected profit or loss at that level.
- Read the break-even units and revenue in the result panel.
- Use the scenario table to see profit at various multiples of break-even — useful for forecasting and setting targets.
- Share the link — your inputs are saved in the URL so you can bookmark different product scenarios.
Methodology & Assumptions
- Break-Even Units = ceiling(Fixed Costs / (Price − Variable Cost per Unit)).
- Break-Even Revenue = Break-Even Units × Price.
- Contribution Margin = Price − Variable Cost per Unit; CM Ratio = CM / Price.
- Profit at expected units = (Expected Units × CM) − Fixed Costs.
- Single-product assumption: all units use the same price and variable cost. For multi-product businesses, use weighted averages.
- All costs are pre-tax. Tax is applied to post-break-even profit, not to the break-even point itself.
Glossary
- Break-even point
- The sales volume at which total revenue equals total costs; profit is zero.
- Fixed costs
- Costs that don't change with sales volume — rent, salaries, insurance, software subscriptions, equipment leases.
- Variable costs
- Costs that scale per unit sold — materials, packaging, shipping, payment processing, production labor.
- Contribution margin (CM)
- Price minus variable cost per unit; the dollars each sale contributes to covering fixed costs.
- Contribution margin ratio
- CM / Price, expressed as a percentage. Higher = more resilient to volume swings.
- Target profit
- The profit goal used to calculate required sales: (Fixed + Target Profit) / CM.
- Margin of safety
- The percentage by which actual or projected sales exceed break-even sales. Higher = less risk.
- Operating leverage
- The degree to which a business has fixed vs variable costs. Higher fixed costs = higher leverage = larger profit swings with volume.
- Mixed cost
- A cost with both a fixed and variable component (e.g., a phone plan with a base fee plus per-minute charges). Decompose into fixed and variable pieces.
- Step-fixed cost
- A cost that stays fixed within a range of activity but jumps at thresholds — e.g., hiring an additional part-time employee once orders exceed a certain volume.
Frequently Asked Questions
The sales level (in units or dollars) at which total revenue equals total costs — fixed plus variable. Profit is zero. Below it you lose money; above it every additional unit is profit equal to its contribution margin.
Break-Even Units = Fixed Costs / (Price − Variable Cost per Unit). The denominator is the contribution margin. Example: $5,000 fixed, $15 price, $3 variable → CM $12 → break-even 417 units.
The profit from each sale after variable costs but before fixed costs. CM = Price − Variable Cost. CM ratio = CM / Price. A $15 product with $3 variable cost has $12 CM and 80% CM ratio.
Fixed costs stay the same regardless of volume (rent, salaries, insurance). Variable costs scale per unit (materials, packaging, shipping, processing fees). Some are mixed — split them.
Break-Even Revenue = Fixed Costs / CM Ratio. Or multiply break-even units by price. For a multi-product business, use the ratio method — it handles mixed price points cleanly.
Units for Target Profit = (Fixed Costs + Target Profit) / CM per Unit. Example: ($5,000 + $3,000) / $12 = 667 units. Translates a profit goal into a concrete monthly sales target.
CM is negative — you lose money on every unit, and more volume makes it worse. Break-even is mathematically impossible without raising price, lowering variable cost, or both.
Work backwards: Price = Variable Cost + (Fixed + Target Profit) / Realistic Units. If the required price exceeds market willingness, you need more volume, lower fixed costs, or a different offer.
No. Break-even = zero accounting profit. Real profitability requires selling above break-even plus covering opportunity cost and reinvestment. Healthy small businesses target 15–30% operating margin, not just break-even.
Yes — the unit is a billable hour, project, or client. A consultant with $3,000 monthly fixed costs billing $100/hr with $10 variable per hour needs 34 hours/month to break even. Fixed/variable split logic is the same.