Free tool · Planning
Break-even calculator
How many sales do you need before the business pays for itself? Enter fixed costs, price and variable cost per unit, and optionally the profit you want. Runs in your browser; nothing is saved.
Your numbers
Rent, salaries, insurance, loan payments, software: costs that don't change with sales. Use one month or one year.
Materials, packaging, shipping, card fees, sales commission: what each extra sale costs you.
Break-even point
Contribution margin per unit
Price minus variable cost
$27.00
Contribution margin ratio
Share of each sale left to cover fixed costs
60%
Units to break even
222.22, rounded up to a whole unit
223
Sales to break even
$10,035.00
Before income tax. Assumes the price and the variable cost per unit stay the same at every volume. Works in any currency.
How break-even is calculated
- Contribution margin per unit = selling price − variable cost per unit.
- Break-even units = fixed costs ÷ contribution margin per unit, rounded up to a whole unit.
- Break-even sales = break-even units × selling price.
- With a target profit: units = (fixed costs + target profit) ÷ contribution margin per unit.
Worked example
A small bakery has $6,000 of fixed costs a month. A cake sells for $45 and costs $18 in ingredients, box and card fee. Each cake contributes $27. $6,000 ÷ $27 = 222.2, so it needs 223 cakes ($10,035 of sales) a month to break even. To make $3,000 profit as well: $9,000 ÷ $27 = 333.3, so 334 cakes, or $15,030.
Ways to lower your break-even point
- Raise the price. A small price rise goes straight to contribution margin. Check it against your markup with the markup and margin calculator.
- Cut variable cost per unit: buy in larger lots, reduce waste, renegotiate shipping or card fees.
- Cut or delay fixed costs: rent, subscriptions you don't use, a hire you can make next quarter. The employee cost calculator shows what a hire adds.
- Sell more of what contributes most. If you sell several products, the mix matters: work out the contribution of each.
Limits of a break-even calculation
It assumes the price and the variable cost stay the same at every volume, and that every unit made is sold. Real costs step up (a second van, a bigger space), discounts creep in, and selling several products means using a weighted average contribution. Treat the answer as a planning figure and check it against your actual budget vs actual each month.
Questions
What is the break-even point?
The level of sales at which total revenue equals total costs, so the business makes neither a profit nor a loss. Below it you lose money; every sale above it adds its contribution margin to profit.
What is the break-even formula?
Break-even units = fixed costs ÷ (price per unit − variable cost per unit). Break-even sales = break-even units × price, or fixed costs ÷ contribution margin ratio. With $6,000 of monthly fixed costs, a $45 price and an $18 variable cost: $6,000 ÷ $27 = 222.2, so 223 units or $10,035 of sales a month.
What is contribution margin?
What each sale leaves after its own variable costs, available to pay fixed costs and then make profit. Price $45 − variable cost $18 = $27 contribution margin per unit, a 60% contribution margin ratio.
What counts as a fixed cost?
Costs that stay the same whatever you sell in the period: rent, salaried wages and their payroll taxes, insurance, loan payments, software subscriptions, your accountant. Variable costs rise with each sale: materials, packaging, shipping, card processing fees and sales commission.
How do I use break-even for a service business?
Use an hour (or a job) as the unit. Price = your hourly rate; variable cost = what each billed hour costs you directly (a subcontractor, materials). The result is the billable hours you need each month.
How do I include the profit I want?
Add the target profit to fixed costs: units = (fixed costs + target profit) ÷ contribution margin. Enter it in the optional field and the calculator shows both figures.
Embed this calculator on your site
Free for blogs, bookkeepers, accountants and associations. Paste this HTML where you want the calculator to appear. It runs on our page inside a frame, so nothing your visitors type reaches your site or ours. Please keep the credit link.
Related
- All free tools
- Markup and margin calculator
- Employee cost calculator
- Monthly closing checklist
- How to record a business loan
General information, not financial advice.
Get started
Know where break-even is every month.
AcboBooks gives you the profit and loss behind the numbers, on your own PC. Bought once.
No card. No account. Nothing to cancel.