Break-Even Calculator
Calculate your business break-even point — how many units you need to sell and how much revenue you need to cover all costs. Understand your contribution margin and pricing strategy.
How to Use This Calculator
- Enter your total Fixed Costs (rent, salaries, insurance, etc.) that don’t change with production volume.
- Enter the Variable Cost per Unit (materials, packaging, shipping) — costs that increase for each unit produced.
- Enter the Selling Price per Unit — how much you charge each customer.
- Click "Calculate Break-Even" to see how many units you need to sell to cover all costs and start making a profit.
Formula
Break-Even Point (Revenue): BEPrevenue = Fixed Costs / Contribution Margin Ratio
Contribution Margin per Unit: CM = Selling Price − Variable Cost per Unit
Contribution Margin Ratio: CM Ratio = CM / Selling Price
The break-even point is where total revenue equals total costs — you neither make a profit nor a loss. Every unit sold beyond the break-even point generates profit equal to the contribution margin.
Examples
Fixed costs: $5,000/month. Variable cost per cake: $8. Selling price: $25. BEP = $5,000 / ($25 − $8) = 295 cakes. Revenue needed: $7,353.
Fixed costs: $50,000/month (servers, team). Variable cost per user: $2. Subscription price: $30/month. BEP = $50,000 / ($30 − $2) = 1,786 users.
Fixed costs: $2,000. Variable cost: $12/item. Price: $30. CM Ratio = ($30 − $12) / $30 = 60%. BEP revenue = $2,000 / 0.60 = $3,333.
Frequently Asked Questions
What is the break-even point?
The break-even point is the level of sales at which total revenue equals total costs (both fixed and variable). At this point, the business neither makes a profit nor incurs a loss. Every sale beyond this point generates profit.
How to calculate break-even?
Divide your total fixed costs by the contribution margin per unit (selling price minus variable cost per unit). For revenue, divide fixed costs by the contribution margin ratio (contribution margin divided by selling price).
What is contribution margin?
Contribution margin is the amount each sale contributes toward covering fixed costs and then generating profit. It is calculated as selling price minus variable cost per unit. A higher contribution margin means fewer units needed to break even.
Why is break-even important for small businesses?
Knowing your break-even point helps you set realistic sales targets, evaluate pricing strategies, secure funding, and make informed decisions about costs. It is one of the most fundamental financial metrics for any business owner.