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Break-Even Calculator

Find your unit and revenue break-even point using contribution margin analysis and visualize margin of safety.

Calculator

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Results

Contribution Margin per Unit
$0.00
Contribution Margin Ratio
0.0%
Break-Even Point (Units)
0
Break-Even Revenue
$0.00
Margin of Safety (Units)
0
Margin of Safety (%)
0.0%
Profit at Expected Sales
$0.00
Daily Break-Even (30-day month)
0.0

Fixed Costs vs Break-Even Revenue

Fixed Costs$10000.00
Break-Even Revenue$0.00

What is Break-Even Point?

Break-even point is the sales level where total revenue equals total costs (profit = $0).

Below break-even: You're losing money.

At break-even: No profit, no loss.

Above break-even: You're making profit.

Formula: Fixed Costs ÷ Contribution Margin per Unit.

This tells you the minimum sales needed to stay in business.

What is Contribution Margin?

Contribution margin is the amount each unit sale contributes to covering fixed costs and profit.

Formula: Selling Price - Variable Cost per Unit.

Example: Sell for $50, costs $20 to make = $30 contribution margin.

After you reach break-even, that $30 becomes pure profit on every additional sale!

Fixed Costs vs Variable Costs

Fixed costs stay the same regardless of sales: rent, salaries, insurance, software subscriptions.

You pay these even if you sell zero units.

Variable costs change with each sale: materials, packaging, shipping, sales commissions.

The key: lower fixed costs = lower break-even point = faster profitability.

Why Margin of Safety Matters

Margin of safety shows how much sales can drop before you hit break-even and stop making profit.

Formula: (Expected Sales - Break-Even Sales) / Expected Sales × 100.

Example: Expect 500 units, break-even is 334 units.

Margin = 33.2%.

Sales can drop 33.2% before you lose money.

Target 25%+ for comfort.

How to Lower Your Break-Even Point

Three ways to reduce break-even: (1) Increase selling price — biggest impact.

A $5 price increase can cut break-even by 15-20%. (2) Reduce variable costs — negotiate with suppliers, improve efficiency. (3) Reduce fixed costs — delay hiring, use co-working space, outsource.

Lower break-even = faster profitability and less risk.

Common Break-Even Mistakes

❌ Forgetting to include all fixed costs (utilities, software, your own salary). ❌ Misclassifying costs (base salary = fixed, sales commission = variable). ❌ Not including property management fees even if self-managing. ❌ Overestimating sales and underestimating expenses. ❌ Ignoring seasonality — calculate annual break-even for seasonal businesses.

Break-Even for Service Businesses

Service businesses often have $0 variable cost per sale.

Example: Consultant charges $150/hour, no variable costs.

Break-even = Fixed Costs ÷ $150.

If fixed costs are $6,000/month, you need 40 billable hours to break even.

Every sale is pure contribution to fixed costs — no materials or shipping to deduct!

Using Break-Even for Pricing Decisions

Calculate break-even at different price points.

Example: At $45 price, need 400 units.

At $50 price, need 334 units.

At $55 price, need 286 units.

Higher price = lower break-even = less risk.

Test if customers will pay the higher price.

Even a small price increase dramatically reduces break-even point.

Sources & References

Harvard Business Review - Break-Even Analysis
https://hbr.org/2012/07/a-quick-guide-to-breakeven-analysis
Investopedia - Break-Even Analysis
https://www.investopedia.com/terms/b/breakevenanalysis.asp
SBA - Break-Even Point
https://www.sba.gov/business-guide/plan-your-business/calculate-your-startup-costs

Break-Even Point Calculation

The break-even point represents the sales volume where total revenue equals total costs—neither profit nor loss occurs.

This critical metric helps businesses understand minimum performance requirements and evaluate pricing strategies.

Break-even analysis considers three components: fixed costs (expenses that don't change with volume like rent, salaries, insurance), variable costs (expenses that scale with production like materials, shipping, commissions), and selling price per unit.

The contribution margin (selling price minus variable cost) represents the amount each sale contributes toward covering fixed costs.

Once fixed costs are covered, every additional sale generates profit at the contribution margin rate.

For service businesses, calculate break-even in billable hours rather than units—with $10,000 monthly overhead and $100/hour billing rate (minus $25/hour variable costs), break-even is 134 hours.

Understanding break-even helps make decisions about pricing changes, cost reduction opportunities, and growth investments.

A safety margin (actual sales above break-even) indicates business health—operating at 150% of break-even provides cushion for slow months.

Key Financial Terms

Understand the essential concepts behind this calculator

Break-Even Analysis

A calculation that determines the point at which total revenue equals total costs, showing how many units must be sold or how much revenue is needed before a business becomes profitable.

Learn more →
View all financial terms in our glossary →

Frequently Asked Questions

Common questions about the Break-Even Calculator

A break even calculator helps you find out how many units you need to sell to cover your costs. This means you won't make a profit or a loss.
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Fixed vs Variable Cost Classification

Fixed costs (rent, salaries, insurance) remain constant regardless of production volume. Variable costs (materials, shipping, commissions) scale proportionally with units produced or sold.
→Source: Harvard Business Review - Cost Management(2023)