Every business, from a market stall to a growing online shop, has one question hanging over it early on: how much do I have to sell before I stop losing money? That point is called the break-even point. Below it you’re making a loss, and above it every extra sale is profit. This calculator finds it for you. Enter your fixed costs, what each unit costs you to make, and what you sell it for, and it tells you how many units you need to sell to cover everything.
Enter your fixed costs: the amount you pay each period no matter how much you sell, such as rent, software subscriptions, insurance or salaries.
Enter the variable cost per unit: what it costs to produce or deliver one more item, such as materials, packaging or payment fees.
Enter the selling price per unit.
Read the result: the number of units and the amount of revenue you need to break even.
Keep the time period consistent. If your fixed costs are monthly, the break-even number you get is also per month.
First, work out how much each sale contributes towards your fixed costs:
Contribution margin = selling price − variable cost per unit
Then:
Break-even units = fixed costs ÷ contribution margin
Break-even revenue = break-even units × selling price
You can also express the margin as a percentage of the price. That’s called the contribution margin ratio, and it gives the same revenue figure:
Break-even revenue = fixed costs ÷ (contribution margin ÷ selling price)
Imagine you make and sell handmade candles.
Fixed costs: $2,400 a month (workshop rent, tools, website)
Variable cost: $6 per candle (wax, wick, jar, label)
Selling price: $14 per candle
Each candle contributes 14 − 6 = $8 towards your fixed costs.
Break-even units: 2,400 ÷ 8 = 300 candles a month
Break-even revenue: 300 × 14 = $4,200
You can check it. At 300 candles, revenue is $4,200. Variable costs are 300 × 6 = $1,800, and fixed costs are $2,400. Together that’s $4,200, so profit is exactly zero.
Breaking even isn’t the goal for most people. To find how much you’d need to sell to earn a certain profit, add that profit to your fixed costs:
Units needed = (fixed costs + target profit) ÷ contribution margin
If you want to make $1,000 a month from the candles:
(2,400 + 1,000) ÷ 8 = 425 candles
Revenue needed: 425 × 14 = $5,950
Try changing one number at a time and watch how the break-even point moves. With the candle example:
Raise the price to $16: the margin becomes $10, and break-even falls to 240 candles.
Variable cost rises to $8: the margin drops to $6, and break-even climbs to 400 candles.
Cut fixed costs to $1,800: break-even falls to 225 candles.
Small changes to price or cost can move the target a lot. This is one of the most useful things about running the numbers before you commit.
Once you know your break-even point, compare it with what you actually sell. The gap is your margin of safety:
Margin of safety = (actual sales − break-even sales) ÷ actual sales × 100
If you sell 400 candles when break-even is 300, your margin of safety is (400 − 300) ÷ 400 = 25%. That means sales could fall by a quarter before you start losing money. The higher the percentage, the more comfortable you are.
Putting a cost in the wrong group. If a cost changes with every unit you sell, it’s variable. If it stays the same, it’s fixed. Mixing them up gives a wrong answer.
Forgetting small costs. Payment processing fees, shipping supplies and returns often get left out, and they eat into your margin.
Leaving out your own pay. If you need to draw a salary from the business, include it in fixed costs.
Assuming a fixed price always holds. Discounts and promotions lower your margin, so recalculate if you plan to run a sale.
Treating the result as a forecast. Break-even tells you what you need to sell. It doesn’t tell you whether customers will buy that many.
What is the difference between fixed and variable costs?
Fixed costs stay the same whatever you sell, such as rent or insurance. Variable costs go up and down with sales, such as materials or packaging.
Can I use this for a service business?
Yes. Treat the cost of delivering one job or one hour as the variable cost, and the price you charge for it as the selling price.
What if I sell more than one product?
The calculator works with one product at a time. For several products, you can use an average price and average variable cost, or calculate each one separately.
What if my selling price is lower than my variable cost?
Then every sale loses money and you can never break even. Raise the price, reduce the cost, or rethink the product.
Does break-even include tax?
Only if you build it in. Use a selling price that excludes sales tax or VAT, since that money isn’t yours to keep.
How often should I recalculate?
Whenever your prices or costs change, and at least a few times a year. Costs drift, and an old calculation can mislead you.
This calculator is a planning aid, not financial or business advice. Real-world results depend on many factors it can’t account for. For important decisions, please speak to an accountant or a qualified adviser.