Find out how many units you need to sell to cover your costs, how much margin of safety you have, and what it takes to hit a profit target.
How to use the break-even calculator
- Enter your fixed costs for a month: the bills you pay whether you sell anything or not.
- Enter your selling price and the variable cost of each unit, meaning what it costs to make or buy, pack and ship one more.
- Add how many units you expect to sell and a profit target if you want to see how far above (or below) break-even you are.
The chart shows where the revenue line crosses the total cost line. Left of that point you’re losing money; right of it, every sale adds to profit.
The break-even formula
| Step | Formula | Example |
|---|---|---|
| Contribution per unit | Price − Variable cost | 35 − 14 = 21 |
| Contribution margin | Contribution ÷ Price | 21 ÷ 35 = 60% |
| Break-even units | Fixed costs ÷ Contribution per unit | 4,500 ÷ 21 = 214.3, so 215 units |
| Break-even sales | Fixed costs ÷ Contribution margin | 4,500 ÷ 60% = 7,500 |
| Units for a target profit | (Fixed costs + Target) ÷ Contribution | (4,500 + 2,000) ÷ 21 = 310 |
Always round break-even units up. Selling 214 units still leaves you a few dollars short.
Fixed or variable?
| Usually fixed | Usually variable |
|---|---|
| Rent and utilities | Materials or stock you resell |
| Salaries and contractor retainers | Packaging and postage |
| Software subscriptions | Payment processing and marketplace fees |
| Insurance, loan repayments | Sales commission |
| Your own drawings, if you pay yourself a set amount | Hourly labour that rises with output |
When a cost is partly both, like a phone plan with a base fee and extra charges, put the base in fixed costs and estimate the rest per unit. If you’re unsure, treat it as fixed. That gives a slightly higher break-even point, which is the safer mistake.
Reading the result
The margin of safety is the most useful number here. With the example inputs, expected sales of 300 units give a 29% margin of safety: sales can drop by that much before you hit break-even. A slow month that’s 20% down still covers the bills. If your margin of safety is under 10%, one bad month puts you in the red, and it’s worth fixing before it happens.
You’ve got three levers, and they don’t work equally. Raising the price by a little often moves break-even the most, because all of the increase goes into contribution. Cutting variable costs helps on every unit. Cutting fixed costs helps too, but it’s usually the hardest to do quickly.
Try it in the calculator: moving the example price from 35 to 38 drops break-even from 215 units to 188. Getting the same result by cutting fixed costs would take a saving of about 560 a month.
Break-even in Excel
With fixed costs in B1, price in B2 and variable cost in B3:
Break-even units: =ROUNDUP(B1/(B2-B3),0)
Break-even sales: =B1/((B2-B3)/B2)Excel’s Goal Seek (Data > What-If Analysis > Goal Seek) can also find the price that hits a target number of units.
Frequently asked questions
What is a break-even point?
It’s the sales level where total revenue equals total costs, so you make neither a profit nor a loss. Below it you lose money; above it you make money.
How do I calculate break-even with several products?
Use an average. Work out the weighted average contribution margin across your product mix, then divide fixed costs by it to get break-even sales in money. The calculator works for this if you enter your average price and average variable cost per sale.
Does break-even include my own salary?
It should if you pay yourself a set amount. Add it to fixed costs. Otherwise you’ll “break even” while working for free.