Business · Live
Break-even Point Calculator
Enter your fixed costs, variable cost per unit, and selling price to instantly see how many units you need to sell before you start making a profit - with a chart showing exactly where revenue crosses costs.
Inputs
Your cost structure
Contribution margin
Price $40.00 minus variable cost $15.00 per unit
Break-even point
Total sales to break even: $16,000.00
Break-even chart
Where costs meet revenue
Profit scenarios
Profit and loss by volume
| Volume | Units sold | Revenue | Profit / Loss |
|---|---|---|---|
| 0.5× | 200 | $8,000.00 | -$5,000.00 |
| 0.75× | 300 | $12,000.00 | -$2,500.00 |
| 1×break-even | 400 | $16,000.00 | +$0.00 |
| 1.1× | 440 | $17,600.00 | +$1,000.00 |
| 1.25× | 500 | $20,000.00 | +$2,500.00 |
| 1.5× | 600 | $24,000.00 | +$5,000.00 |
| 2× | 800 | $32,000.00 | +$10,000.00 |
Business guide
What is break-even analysis and why every business needs it
Break-even analysis tells you the minimum sales volume required to cover all of your costs. At that exact point, your business neither makes nor loses money. Every unit sold above the break-even quantity generates pure profit; every unit sold below it deepens the loss. It is one of the most practical calculations in business finance, and you should run it before you set a price, open a location, or launch a product.
The three inputs
- Fixed costs are expenses that do not change regardless of how many units you produce or sell. Rent, insurance, salaried staff, loan repayments, and software subscriptions are fixed costs. They exist even if you sell nothing.
- Variable costs per unit are expenses that scale directly with production. Raw materials, packaging, transaction fees, and per-unit labor are variable costs. If you sell twice as many units, your total variable cost doubles.
- Selling price per unit is the amount a customer pays for one unit of your product or service, before any discounts.
The formulas
First, calculate the contribution margin: the amount each unit contributes toward covering fixed costs after the variable cost is subtracted.
Then divide your fixed costs by the contribution margin to find the break-even unit volume.
Example: You pay $10,000 per month in fixed costs. Each product costs $15 to produce and sells for $40. The contribution margin is $25 per unit. The break-even point is 10,000 / 25 = 400 units, or $16,000 in monthly revenue.
What is the contribution margin ratio?
The contribution margin ratio (CM ratio) expresses the contribution margin as a percentage of the selling price.
In the example above, the CM ratio is 25/40 = 62.5%. This means 62.5 cents of every dollar of revenue goes toward covering fixed costs. Once fixed costs are covered, 62.5 cents of every dollar of revenue becomes profit. A higher CM ratio means faster profit accumulation above break-even.
How to read the break-even chart
The chart shows two lines plotted against units sold on the x-axis and dollars on the y-axis.
- Revenue line (cyan): Starts at $0 and rises proportionally with units. Slope = selling price per unit.
- Total cost line (red, dashed): Starts at your fixed costs on the y-axis and rises at a flatter slope. Slope = variable cost per unit.
The two lines cross at the break-even point, marked by the amber dashed reference line. To the left of that line, total cost exceeds revenue (loss). To the right, revenue exceeds total cost (profit). The vertical gap between the lines at any unit volume is the profit or loss at that volume.
Limitations of break-even analysis
- Assumes a constant price. Volume discounts, promotional pricing, or tiered pricing all change the effective selling price. Run separate calculations for each price point.
- Assumes costs are linear. In practice, variable costs often decrease at scale (bulk purchasing) or increase (overtime wages, expedited shipping). The formula is an approximation within a relevant range of output.
- Ignores time value of money. If it takes 18 months to reach break-even, the capital tied up during that period has an opportunity cost that the formula does not capture.
- Does not account for multiple products. If you sell several products with different margins, you need a weighted average contribution margin. The simpler approach is to run a separate calculation for each product line.
How to use break-even analysis in practice
- Pricing decisions: Work backward from your target break-even unit volume to the minimum acceptable selling price. If the required price is higher than the market will bear, you need to cut costs or find a different product.
- Capacity planning: If your break-even point is 800 units per month but your production capacity is 500, the business model does not work at current cost and price levels.
- Evaluating a price cut: A 10% price cut reduces the contribution margin and raises the break-even point. Run the calculator with the new price to see by how many more units you would need to increase sales to compensate.
- Startup runway planning: If your break-even is 6 months away at your projected sales rate, you need at least 6 months of capital to cover fixed costs plus a buffer.
Margin of safety
The margin of safety is the gap between your actual or projected sales and the break-even point. It tells you how much sales can fall before you start losing money.
Margin of safety (%) = (Actual units - Break-even units) / Actual units x 100
A margin of safety of 30% or higher is generally considered healthy for a small business. A margin below 10% means the business is operating close to its break-even point and is vulnerable to any drop in demand.
Disclaimer
This calculator is provided for educational and planning purposes. It assumes a single product, linear cost and revenue functions, and a constant selling price. Real-world results will vary. Consult a qualified accountant or financial advisor before making significant business decisions based on break-even projections.