Break-Even Calculator
Use this break-even calculator to find how many units you need to sell before your business stops losing money. Enter your fixed costs, the selling price and the variable cost of each unit. You get the break-even point in units and in sales dollars, your contribution margin and, optionally, the sales needed for a profit goal and your margin of safety.
Updated
Results
- Break-even revenueSales needed to cover fixed costs
- Contribution margin per unitPrice minus variable cost
- Contribution margin ratio
- Units for target profitShown when you enter a target profit
- Revenue for target profitShown when you enter a target profit
- Profit at expected salesShown when you enter expected sales
- Margin of safetyHow far sales can fall before a loss
Results are estimates. See the methodology below.
How to use the calculator
- Fixed costs: costs that stay the same whatever you sell, such as rent, salaries, insurance, loan interest and software, for the period you're analyzing (usually a month or a year).
- Price per unit: what a customer pays for one unit, before sales tax.
- Variable cost per unit: what each additional unit costs you: materials, packaging, shipping, payment processing fees, sales commissions.
- Advanced options: a target profit for the same period shows the units and revenue needed to earn it; expected units show your projected profit and margin of safety.
The target and expected-sales results appear only when you fill in those fields. Keep every input on the same time period.
How the calculator works
Each unit you sell contributes its price minus its variable cost toward covering fixed costs. That amount is the contribution margin:
break-even units = fixed costs ÷ (price − variable cost per unit)
- Units are rounded up, since you can't sell part of a unit.
- Contribution margin ratio = contribution margin ÷ price.
- Break-even revenue = fixed costs ÷ contribution margin ratio. It uses the exact, unrounded break-even point, so it can be slightly below units × price.
- Units for a target profit = (fixed costs + target profit) ÷ contribution margin, rounded up.
- Expected profit = expected units × contribution margin − fixed costs.
- Margin of safety = (expected units − break-even units) ÷ expected units.
The model assumes a single price, a constant variable cost and fixed costs that don't change within the period. Profits are before income tax.
Worked examples
1. $10,000 of fixed costs, $50 price, $30 variable cost
Each unit contributes $20, a 40% contribution margin ratio. You break even at 500 units, or $25,000 in sales.
2. A coffee cart
Monthly fixed costs are $6,500 (permit, cart lease, insurance, the owner's draw). A coffee sells for $4.75 and costs $1.60 in beans, milk and cup. The contribution margin is $3.15 (66.32%), so break-even is 2,064 cups a month, about $9,801.59 in sales.
- To earn $3,000 a month, the cart needs 3,016 cups, or $14,325.40 in sales.
- If it expects to sell 2,600 cups, profit is $1,690 and the margin of safety is 20.6%: sales could fall by about a fifth before the cart loses money.
3. Raising the price
At $5.25 a cup with the same costs, the contribution margin rises to $3.65 and break-even drops to 1,781 cups. With the same 2,600 cups, profit becomes $2,990 and the margin of safety 31.5%, as long as customers keep buying at the higher price.
How to read your results
Compare break-even units with what you can realistically sell and produce in the period. A thin margin of safety means a slow month wipes out profit. You can lower the break-even point three ways: raise the price, cut variable cost per unit or reduce fixed costs. Small changes in contribution margin move the result a lot when the margin is small.
Frequently asked questions
What counts as a fixed cost?
Costs that don't change with how much you produce or sell. The SBA lists rent and lease payments, salaries, property taxes, insurance, interest and depreciation. Some costs, like phone service or utilities, have a fixed and a variable part; split them as best you can.
What is the difference between contribution margin and gross margin?
Contribution margin subtracts only variable costs from price. Gross margin subtracts cost of goods sold, which under accounting rules may include some fixed production costs. For break-even analysis, contribution margin is the right measure.
How do I calculate break-even for several products?
Use a weighted average: estimate your sales mix, then enter the average price and average variable cost per unit weighted by that mix. The result is a total number of units in that same mix.
Why do I get an error when price equals variable cost?
If each unit earns nothing above its variable cost, no sales volume can cover fixed costs, so there is no break-even point. The price must be higher than the variable cost per unit.
Does the target profit include taxes?
No. The target is profit before income tax. If you want a specific after-tax amount, enter a larger pre-tax target that leaves room for what you expect to owe.
How long should it take a new business to break even?
It varies widely by industry and by how much you spend upfront. Running the numbers against a monthly sales forecast shows when you could reach break-even, which helps you plan how much startup capital you need.
Sources
This calculator provides estimates for planning purposes only and is not financial, accounting or tax advice. Real costs and sales rarely follow a straight line, so test several scenarios.