Break-Even Point Calculator
Calculate how many units you need to sell to cover all your costs, and the revenue required to reach break-even. Enter fixed costs, variable cost per unit, and selling price to see the break-even point and contribution margin.
What Is Break-Even?
Break-even is the point where total revenue equals total costs. At that point, the business is neither making a profit nor losing money. Every unit sold above break-even generates profit; every unit below generates a loss.
Break-even analysis is used before launching a product, setting sales targets, or evaluating whether a business idea is viable. It answers the question: how much do I have to sell to survive?
Break-Even Formula
Break-Even Units = Fixed Costs ÷ (Price − Variable Cost per Unit)
Break-Even Revenue = Break-Even Units × Selling Price
Contribution Margin = Price − Variable Cost per Unit
- Fixed costs — rent, salaries, insurance, software — costs that do not change with volume
- Variable cost per unit — materials, packaging, shipping — costs that rise with each unit sold
- Contribution margin — the money each unit contributes toward covering fixed costs
Worked Example
A business has $10,000 in fixed costs, a $25 variable cost per unit, and sells at $50 per unit:
Contribution margin = $50 − $25 = $25 per unit
Break-even units = $10,000 ÷ $25 = 400 units
Break-even revenue = 400 × $50 = $20,000
At 400 units, revenue of $20,000 exactly covers fixed costs ($10,000) plus variable costs (400 × $25 = $10,000). Profit is $0. Sell one more unit and you make $25 profit.
How to Lower Your Break-Even Point
There are only three ways to reduce the number of units you need to sell to break even:
- Raise the price — increases contribution margin directly. A $5 price increase on the example above lowers break-even to 286 units.
- Lower variable cost per unit — negotiate supplier pricing, reduce packaging, cut shipping cost. A $5 reduction lowers break-even to 333 units.
- Lower fixed costs — move to cheaper premises, cut software subscriptions, reduce admin headcount. Halving fixed costs to $5,000 halves break-even to 200 units.
Frequently Asked Questions
What is a break-even point?
The break-even point is the sales volume at which total revenue equals total costs. At this point, the business has zero profit and zero loss. It is the minimum sales required to stay in business.
What is contribution margin?
Contribution margin is the selling price minus variable cost per unit. It is the amount each unit contributes toward covering fixed costs and then generating profit. In the example above, each unit sold contributes $25 toward the $10,000 of fixed costs.
What is the difference between break-even and payback?
Break-even measures when cumulative profit equals zero — the point where you stop losing money. Payback measures when cumulative cash flow equals the initial investment — the point where you recover what you spent. Break-even is about income statement; payback is about cash.
What if variable cost exceeds selling price?
If variable cost per unit is higher than selling price, contribution margin is negative — every unit sold increases your loss. There is no break-even point in this case; the product is unprofitable by design. Either raise the price, cut the variable cost, or stop selling the product.
Can break-even be calculated in dollars instead of units?
Yes. Break-even in dollars = Fixed Costs ÷ Contribution Margin Ratio. The contribution margin ratio is contribution margin per unit divided by selling price. In the example, the ratio is $25 ÷ $50 = 0.50, so break-even revenue is $10,000 ÷ 0.50 = $20,000 — the same number.
How does break-even help with pricing decisions?
Break-even shows how sensitive your required sales volume is to price. A small price increase lowers the number of units you need to sell to break even. A small price cut raises it — often dramatically, because contribution margin shrinks both the numerator and the denominator of the formula.