Break-even point calculator

What is the break-even point?

The break-even point is the number of units you need to sell (or the amount of revenue you need to bring in) for your total revenue to exactly equal your total costs, the point where you're neither making nor losing money. Sell fewer units than this and you're operating at a loss, sell more and you start generating profit.

This calculator finds your break-even point from your fixed costs, variable cost per unit, and selling price, and can also show how many units you'd need to sell to hit a specific profit target.

How to use it

1. Enter your fixed costs for the period you're analyzing (often monthly), the costs that stay the same no matter how much you sell.
2. Enter your variable cost per unit, the direct cost of producing or acquiring one more unit.
3. Enter your selling price per unit.
4. Optionally, enter a target profit to also see how many units and how much revenue you'd need to hit that goal, beyond just breaking even.
5. Click Calculate to see your break-even point, contribution margin, and a visual break-even chart.

Fixed costs vs. variable costs

Fixed costs stay constant regardless of how many units you sell, things like rent, salaries, insurance, and loan payments. Variable costs scale directly with production or sales volume, things like raw materials, packaging, and per-unit shipping. Getting this split right matters, since misclassifying a cost as fixed when it's actually variable (or vice versa) will throw off your break-even calculation.

Understanding contribution margin

Contribution margin is what's left from each unit's selling price after covering its variable cost, in other words, how much each sale "contributes" toward covering your fixed costs (and eventually, profit). It's calculated as Selling Price − Variable Cost per Unit. The break-even point in units is simply your total fixed costs divided by this contribution margin, since each unit sold chips away at the fixed cost pile by exactly that amount.

Reading the break-even chart

The chart plots three lines against the number of units sold: a flat line for fixed costs (unchanged regardless of volume), an upward-sloping line for total costs (fixed costs plus variable costs, which grows with each unit), and an upward-sloping line for revenue (which starts at zero and grows faster than total costs, assuming a profitable selling price). The point where the revenue line crosses the total cost line is your break-even point, below it you're in a loss (shaded), above it you're in profit.

Common uses

• Deciding whether a new product or business idea is financially viable before launching
• Setting a sales target that the whole team can rally around
• Understanding how a price change would shift your break-even point
• Working out how many units you'd need to sell to hit a specific profit goal
• Evaluating whether reducing fixed or variable costs would have a bigger impact on profitability

Frequently asked questions

What if my selling price is lower than my variable cost?

Then there's no break-even point at all, every unit sold loses money regardless of volume, since each sale doesn't even cover its own variable cost, let alone contribute toward fixed costs. The selling price needs to exceed the variable cost per unit for a break-even point to exist.

Does a lower break-even point always mean a better business?

Generally, a lower break-even point means less risk, since you need to sell less to become profitable, but it's worth looking at the full picture, including your profit margin at higher volumes and overall market demand, not just the break-even figure in isolation.

Should I use monthly or annual fixed costs?

Either works, as long as you're consistent, if you enter monthly fixed costs, your break-even units and revenue will represent a monthly target; if you use annual figures, the result represents an annual target instead.

How does the target profit calculation work?

It uses the same logic as break-even, but adds your target profit to the fixed costs before dividing by the contribution margin, since you now need to cover fixed costs plus your desired profit before you're done. Units needed = (Fixed costs + Target profit) ÷ Contribution margin per unit.