Break-Even Analysis Calculator
Calculate how many units you need to sell or revenue you need to generate to cover all costs.
Find your break-even point
The sales level where total revenue equals total costs—no profit, no loss.
Rent, salaries, insurance, software subscriptions—costs that don't change with volume.
Used to calculate margin of safety and projected profit.
How to use this calculator
- Enter your selling price—the price a customer pays for one unit of your product or service.
- Enter your variable cost per unit—the direct cost to produce or deliver one unit (materials, hourly labor, shipping, payment fees).
- Enter your total fixed costs—monthly expenses that don't change with sales volume: rent, salaried payroll, insurance, software, loan payments.
- Optionally enter expected monthly unit sales to see projected profit and your margin of safety.
- Click Calculate to see exactly how many units you need to sell each month to cover all costs.
- Test different prices or cost cuts to see how each lever shifts your break-even point.
How break-even analysis works
Every business has two kinds of costs. Fixed costs—rent, salaried payroll, insurance, software subscriptions—stay the same whether you sell one unit or a thousand. Variable costs—materials, hourly labor, packaging, shipping, payment processing fees—rise and fall with each unit sold. The gap between your selling price and your variable cost per unit is what's left to chip away at fixed costs. That gap is called the contribution margin, and break-even analysis is built entirely around it.
The break-even formula
Break-Even Units = Fixed Costs ÷ (Price − Variable Cost per Unit)
The denominator—price minus variable cost—is your contribution margin per unit. Each unit sold contributes that amount toward covering fixed costs. Once fixed costs are covered, every additional unit drops straight to profit. Multiplying break-even units by price gives you break-even revenue: the monthly or annual sales level needed to keep the lights on.
Contribution margin ratio
Divide contribution margin per unit by price to get the contribution margin ratio—the percentage of each sales dollar that goes toward covering fixed costs. A 60% contribution margin ratio means 60 cents of every sales dollar contributes to fixed costs and (beyond break-even) to profit. This ratio is especially useful when you sell multiple products at different prices: you can compute a blended ratio across your product mix.
Margin of safety
Once you know your break-even, you can calculate your margin of safety—the cushion between expected sales and break-even sales, usually expressed as a percentage. A 30% margin of safety means sales could fall 30% before you start losing money. A 10% margin of safety is risky; a small dip in demand or a price war could push you into losses. Most healthy businesses target at least a 20–30% margin of safety.
Three levers to lower break-even
You can move break-even in three ways: reduce fixed costs (renegotiate rent, outsource non-core functions, cut software bloat), reduce variable costs (find cheaper suppliers, improve process efficiency, negotiate volume discounts), or raise prices (premium positioning, value-adds, tiered packaging). The most sustainable strategies combine modest price increases with disciplined cost management. A 10% price increase, for example, can sometimes reduce break-even by more than 20% if your contribution margin is high.
When break-even isn't enough
Break-even tells you when you stop losing money—but it doesn't tell you when you're generating enough profit to reinvest, repay owners, or build reserves. Most healthy businesses aim to operate at 1.5–2x break-even, giving them room to absorb shocks, fund growth, and reward risk. Pair break-even analysis with a profit margin target to know both your floor and your goal.
Worked example
Scenario: A coffee roaster sells 12-oz bags for $45 each. Variable costs (beans, packaging, shipping, payment fees) total $18 per bag. Monthly fixed costs—commercial kitchen rent, salaried staff, insurance, marketing—run $12,000. They expect to sell 700 bags per month.
- Contribution margin per unit: $45 − $18 = $27
- Contribution margin ratio: $27 ÷ $45 = 60%
- Break-even units: $12,000 ÷ $27 = 445 bags
- Break-even revenue: 445 × $45 = $20,025
- Profit at 700 bags: (700 − 445) × $27 = $6,885/month
- Margin of safety: (700 − 445) ÷ 700 = 36.4%
Sales could fall 36% before the roaster dips into losses—a healthy cushion. If they raise the price to $50, contribution margin rises to $32, and break-even drops to 375 bags. That 11% price increase cuts break-even by 16%—a powerful illustration of why pricing strategy is often the highest-leverage decision a small business makes.
Glossary
- Break-Even Point
- The sales level—expressed in units or revenue—at which total revenue exactly equals total costs. Below this point you lose money; above it you profit.
- Fixed Costs
- Expenses that stay the same regardless of production volume: rent, salaried payroll, insurance, software subscriptions, loan payments.
- Variable Costs
- Expenses that change with each unit produced or sold: raw materials, hourly labor, packaging, shipping, payment processing fees.
- Contribution Margin
- Price minus variable cost per unit. The amount each sale contributes toward covering fixed costs—and beyond break-even, to profit.
- Margin of Safety
- The percentage by which expected sales exceed break-even sales. The bigger the cushion, the more revenue can drop before losses begin.
- Contribution Margin Ratio
- Contribution margin per unit divided by price. Shows what fraction of each sales dollar is available to cover fixed costs.
Frequently asked questions
Quick answers to the most common questions about break-even analysis calculator.
This calculator is provided for informational and educational purposes only and does not constitute financial, legal, tax, or professional advice. Results are estimates based on the inputs you provide and standard assumptions. Actual figures may vary. Please consult a qualified professional before making financial decisions. Read our full disclaimer.