How to use this calculator
- Enter your Fixed costs for the period, such as rent, software and salaries that do not change with sales.
- Enter the Price per unit and the Variable cost per unit (materials, packaging, fees).
- Optionally add a Target profit to see the units needed to earn it.
- Read Break-even units, Break-even sales and the contribution margin, then check the table of outcomes.
What break-even means
Your break-even point is the sales volume where total revenue equals total cost, so profit is exactly zero. Below it you lose money, above it every extra sale adds profit. It works because each sale contributes a fixed amount toward covering your fixed costs, called the contribution margin.
Break-even units = (Fixed costs + Target profit) ÷ (Price − Variable cost)- Fixed costs = costs that stay the same regardless of units sold
- Price − Variable cost = contribution margin per unit
- Target profit = 0 for a pure break-even point
- Break-even sales = units × price, with units rounded up
Example: a small candle business
Say monthly fixed costs are $4,800, each candle sells for $12 and costs $4.50 in wax, jars and fees. The contribution margin is $7.50 per candle (62.5% of price), so the break-even point is 640 candles, or $7,680 in sales.
To earn $3,000 a month you need $7,800 to cover: 1,040 candles and $12,480 in sales. The table confirms it: at 1,040 units, revenue $12,480, total cost $9,480, profit $3,000. At 520 units, half of break-even for that target, the loss is $900.
How to use the result
Compare the break-even volume with what you can realistically sell. If it is 640 units and you sell 300, you do not have a pricing problem you can ignore; you need a different plan. The ratio of expected sales to break-even sales is your safety margin.
Test changes before you make them: raise the price by $1, cut variable cost by 50 cents, or reduce fixed costs, and watch the volume move. Check a price change against the profit margin calculator, and judge a big upfront purchase with the ROI calculator.
Ways to lower your break-even point
There are only three levers: cut fixed costs, cut variable cost per unit, or raise the price. A higher price helps most because it widens the contribution margin on every unit, but it can reduce demand, so test it carefully.
Converting fixed costs into variable ones, for example outsourcing fulfillment instead of renting a warehouse, lowers risk at low volume though it can cost more per unit at high volume.
Common mistakes
Leaving out your own pay, payment processing fees or returns makes break-even look easier than it is. Another error is mixing periods, such as annual fixed costs with monthly sales. Costs that look fixed, like advertising, may need to rise to hit the volume the formula demands.
Assumptions and limits
The model assumes one product with a constant price and constant variable cost per unit, and that fixed costs do not jump as you grow. Real businesses have several products, discounts and step costs such as a second employee, so use the result as a planning estimate, not a forecast. If the price does not exceed the variable cost, the calculator shows a warning because no volume can break even.
Frequently asked questions
What is the break-even formula?
Divide fixed costs by the contribution margin, which is price minus variable cost per unit. The result is the number of units to sell, rounded up.
What counts as a fixed cost?
Costs that do not change with units sold in the short term: rent, salaries, insurance, software subscriptions and loan payments.
How do I find break-even sales in dollars?
Multiply break-even units by the price. Alternatively divide fixed costs by the contribution margin ratio.
Why add a target profit?
Break-even only covers costs. The target profit field tells you the volume needed to earn a specific amount, such as your owner's pay.
Can the break-even point change?
Yes. Any change to price, unit cost or fixed costs shifts it, so recalculate whenever those do.